Taxing tech companies won’t solve the real problem - the G7’s dangerous spending addiction

The run up to the recent G7 summit was headlined by the announcement of an agreed level of tax on global tech companies, something hailed as a big step forward. Saqib Qureshi writes that this is really just a smokescreen to hide the more deep-rooted financial problems of the G7.

In light of recent revelations that the world's wealthiest paid almost nothing in income tax, and that some of the world's wealthiest tech corporations likewise ducked their civic responsibilities through, shall we say, creative accounting, it's no surprise that public opinion seems to be coalescing behind (tech) taxing the wealthy.

Intended to force these economic behemoths to (finally) contribute their fair share, the tech tax agreed by the G7 in the run up to its recent summit is a superficially good and necessary idea. Governments, after all, have big holes to plug, not least after the damage done by the COVID pandemic. However, if we think the tech tax is going to fix that problem, we are misunderstanding the problem, both its effects – and its causes.

The real problem here, which the tech tax can do little if anything to meaningfully address, is that G7 governments have accelerated their wasteful spending, beyond all limits of accountability and sustainability. Worse still, their track records suggest that, at minimum, these governments can hardly be trusted with such massive amounts.

This is especially concerning because, as the latest data demonstrates, consumer prices (in the United States specifically) are rising faster than predicted, inevitably throwing a wrench into President Biden's excessively ambitious agenda. The stimulus packages COVID requires will extract a penalty from the public for many years to come.

Which might lead one to wonder: Why is so much attention being paid to the tech tax? Quite simply because it is a distraction. By focusing on the (frequently outrageous) tax record of tech titans, and tech companies, the public is provoked into believing their governments are (finally) pursuing justice, fairness, and equity. Whereas in fact their governments are merely throwing stones from within unaffordable glass parliaments. Yes, it is true many of the world's wealthiest paid next to nothing in income tax. It is also true that many tech companies have escaped their fiscal responsibilities. Yet even if they were fairly taxed, the underlying problem would remain.

Since Covid began forcing lockdowns in March last year, total global debt has grown to approximately $300 trillion. Given that Covid is receding, and inflation is increasing, what can possibly explain why some politicians want to continue to spend exorbitant sums on projects that sound good on paper, but which we can hardly afford?

Not to mention: Why would we trust our governments to even spend that money in ways that are responsible, reasonable, and true to their stated objective? It was already the case, prior to the pandemic, that many G7 governments were deeply corrupt. (The United States, for example, and contrary to some people's perceptions, was one of them.) The pandemic identified and exacerbated the worst in many of our institutions, governments included. What had been corruption on a smaller scale became corruption on a grander scale. That was all the more damning considering that politicians in ostensibly free and democratic societies were profiting off of a pandemic.

Literally lining their pockets while their citizens struggled to breathe.

The G7 has been littered with stories of backhand deals and corruption. In the United Kingdom, a worrying number of PPE contracts went to companies with government connections! In Germany, meanwhile, politicians, including Members of Parliament, made money on face masks and the like. In Italy, a $1.6 billion deal landed one politician a tidy $85 million. But what do we expect? Governments, unlike the private sector, are known for sloth, inefficiency, nontransparent accounting, and murky finances. Combine that with a practically unlimited spigot of money, and the possibility for corruption increases exponentially. Nor should we imagine there will be much punishment for it.

For example, many Western governments knew COVID was coming, yet seemed entirely unprepared for it. In the instance of the United States, the Trump White House practically threw out all the work the Obama administration had done to sketch out how to survive and outlast a pandemic, then did next to nothing. Add to this that President Trump and UK PM Boris Johnson made light of the virus, and you can see why the world's wealthiest countries performed so poorly. That description hardly does justice to the enormity of the damage inflicted on our societies: Hundreds of thousands of people perished – who could have been saved?

And now, these same governments, which so badly bungled a response to a lethal pandemic, are asking for blank checks, in the belief that we can somehow shrug off inflation, see that money is spent responsibly, and that the resulting contracts will not go to privileged elites and those with insider access? If we can't expect politicians, bureaucrats, and civil servants who failed in their most basic duties to face meaningful accountability, why should we imagine they'll somehow magically transform themselves when it comes to spending trillions more? Or that they're being honest about the consequences of such unlimited spending?

If we are outraged by wealthy companies and entrepreneurs who pay next to nothing in income tax, we should be even more outraged by governments that paid no price for so badly failing us. The tech tax is meant to be an answer to ballooning deficits. But the tech tax can't deflate those deficits because the tech industry didn't cause them. What we need now is accountability. Transparency. Fair-minded neutrality. We can commence with autonomous committees that have as their mandate the investigation of governmental finances coupled with a duty to report their findings to the public. Before we ask others to pay more, we should know where money we already paid is being spent.