ActionAid International has published new research on the scale of potential tax revenue that could be raised from BigTech companies operating in the global south.

ActionAid’s new research analysed Facebook, Alphabet and Microsoft and the potential tax revenue that their market activity could generate, if the tax regime and resulting corporation tax bills better reflected these companies’ economic presence.

The potential $2.8 billion ‘tax gap’ calculation is based on the share of the three tech giants’ global profits, relative to their number of users and adjusted for countries’ GDP per capita, which accounts for users’ relative values across the 20 countries studied.

India, Indonesia, Brazil, Nigeria and Bangladesh were the markets studied with the highest ‘tax gaps’ from these three companies. The total gap for the 20 countries contained in the research was $2.8 billion, equivalent to 729,010 nurses, 770,649 midwives or 879,899 primary school teachers.

Little is known about how much tax these companies are currently paying in developing countries, as they are still not required to publicly disclose this information. However, the report showed that billions could be at stake in the long overdue reform of international corporate taxation.

ActionAid called for a global minimum rate of corporate tax to resolve the issue of multinationals using tax havens to lower their tax bills, arguing that governments urgently need this money to fund public services such as healthcare and social protection for the billions of people affected by the pandemic.

It stated that a new United Nations-led process could be a solution to ensuring poorer countries have a seat at the table in developing global tax rules that affect their ability to invest in public services - adding that these taxes should be progressive, targeting the enormous profits of tech giants, ensuring the costs aren’t passed to the users.

David Archer, global taxation spokesperson for ActionAid International, said: “Women and young people are paying the price for an outdated system that has allowed big tech companies, including giants like Facebook, Alphabet and Microsoft, to rack up huge profits during the pandemic, while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.

“The $2.8 billion tax gap is just the tip of the iceberg - this research covers only three tech giants - but alone, the money that Facebook, Alphabet and Microsoft would be paying under fairer tax rules could transform public services for millions of people."

Commenting on the research findings, Tax Justice Network chief executive Alex Cobham said: “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.”

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