US tech giants are exploiting tax loopholes to avoid paying billions to the governments of developing nations, according to an NGO report.
ActionAid International claims that Facebook, Microsoft and Google parent Alphabet have avoided paying $2.8 billion to 20 developing countries including Nigeria and Bangladesh.
The charity says the sum could address the World Health Organization’s (WHO) shortfall in nurses across those 20 nations, if recovered. Instead, the three companies funnel their revenues through nations with low corporate tax rates, which does not reflect their true presence in economically weaker states, ActionAid says.
The NGO calls for a global corporate tax rate, and the ability for governments to publicy report their financials. And it says the true tax deficit could be far larger.
“Women and young people are paying the price for an outdated system that has allowed big tech companies, including giants like Facebook, Alphabet and Microsoft, to rack up huge profits during the pandemic, while contributing little or nothing towards public services in countries in the global south,” said ActionAid global taxation spokesperson David Archer.
“The $2.8bn tax gap is just the tip of the iceberg – this research covers only three tech giants,” Archer added. “But alone, the money that Facebook, Alphabet and Microsoft would be paying under fairer tax rules could transform public services for millions of people.”
India, Indonesia, Brazil, Nigeria and Bangladesh are the countries most affected by the tech giants’ tax avoidance. Each company has seen user engagement soar during the COVID-19 pandemic.
Facebook has almost 40m users in Bangladesh, for example. But the firm has yet to set up an office in the country, despite warnings from its government and media regulator.
The tax gap for the 20 countries noted in the report would pay for 729,010 nurses, 770,649 midwives or 879,899 primary school teachers. “The Covid-19 pandemic has confirmed the urgent need to reprogram our tax systems,” said Tax Justice Network CEO Alex Cobham. “In 2013, the G20 asked the OECD to deliver reforms that would make sure taxable profits were declared where companies’ real economic activity takes place.”
“Eight years later, ActionAid’s research shows there has been no progress – so that even in countries where public services are desperately short of resources, the excess profits made by digital companies during the pandemic, while local businesses are ordered to lock down, are not giving rise to a fair tax contribution.”