The only thing a challenger in the Democratic primary had to do last year was run on the promise of not being the incumbent. It was not a particularly hard narrative to sell, and most of them did so.
But since taking office in January, Joe Biden has continued that story. He sat down at the resolute desk on the day of his inauguration and, over two days, unleashed a flood of 17 executive orders.
He had the US re-join the Paris Climate Agreement and the World Health Organisation, ended the state of emergency at the US-Mexico border, and stopped the Keystone XL pipeline in its tracks.
Biden’s actions were widely seen as a repudiation of his successor. Since then, he has seemed to have developed a taste to continue doing so.
The president before Biden notoriously talked about ‘America First’ in his inauguration speech, advocating a protectionist and isolationist policy. He defined it as: “We will follow two simple rules: buy American, and hire American. We will seek friendship and goodwill with the nations of the world, but we do so with the understanding that it is the right of all nations to put their own interests first.”
This Week at the G7
Now, Biden is calling for cooperation across the G7 on financial issues around the pandemic, telling other nations that it be unwise to withdraw financial support. This call for government intervention and of an aligned approach across borders is the polar opposite of the previous administration.
This is without even mentioning the taxation agreement on multinational tech companies reached this week by the G7 nations. Although not without controversy, as reported by Deutsche Welle; the 15% minimum corporation tax agreed by the seven countries and plan to tax tech companies wherever they do business rather than where they are domiciled are being hailed as a big step forward and mark a huge differentiator to what came under the preceding US presidency.
Even the BBC, which tends to err on the side of neutrality, said “[it] should transform the international tax treatment of multinationals, tax havens, and low-tax jurisdictions”.
The various tech companies — Google, Apple, Microsoft, Facebook, Amazon — have benefitted for years from domiciling in low-tax jurisdictions. The pandemic has also pushed their profits higher and higher, with Amazon’s Jeff Bezos seeing his wealth grow in 2020 from $116bn to $186bn.
There has been some growing opposition to this. In the US state of Maryland, a digital advertising tax aimed at Big Tech companies was passed in May. As the Christian Science Monitor reported, senator Bill Ferguson, one of those supporting the tax, wrote publicly: “At a time when Maryland’s budget is being impacted in unforeseen and astronomical ways due to covid-19, Maryland families and businesses can foot the bill, or big tech can start paying their fair share.”
The Impact on Tech
This brings us to this week, and the agreement between the G7 nations. And, yet, barely anything shifted on the market for the very tech companies that it targets. As Reuters put it earlier this week: “Shares in US technology giants barely reacted on Monday to a landmark global minimum corporate tax deal agreed between the world’s richest nations, with analysts saying it will take the backing of low-tax nations to have any meaningful impact on the companies’ bottomlines.”
According to the news service: “[…] shares of Apple, Amazon, and Google-parent Alphabet dipped 0.2% to 0.5%, while Facebook edged up 0.1% and Microsoft rose 0.6%. The benchmark S&P 500 index was down 0.2%, while the tech-heavy Nasdaq was little changed. Europe’s tech stocks index slipped 0.1%.”
That is not much of a change, and the consensus seems to be that much of what is proposed will be watered down at a later date. There is little doubt that the tech companies will push back, too, and public opinion may be fought on the hill of whether high tax rates stifle innovation and growth.
Other nations may push back, too, and look at lowering their own tax rates in order to attract a tech giant or two. Switzerland has already made some vague noises about this, in a statement to Reuters that could be interpreted as having many meanings or none.
If the taxation does come to fruition, and the tech companies find themselves on the hook to pay a larger share of their revenues to governments, investors may want to take a breather before selling and jumping ship. The demand for the products is still there, will always be there, and will keep on growing. This may not be the end of tech as an investment, but it may mean that those investments might be shifting in a lower-growth, more heavily regulated form.