Could Tech Giant Tax Boost Smaller Firms?

The G7 group of rich nations this week agreed on a new deal to ensure that multinational companies pay more tax. The historic agreement will look to battle tax avoidance and make companies pay tax in the countries in which they operate, with companies such as Facebook and Amazon likely to be affected. 

The deal comes after years of negotiations and continued press around the lack of tax paid by some large firms. In May it was reported that Amazon paid no corporation tax in Europe on €44billion of income after a bumper year for the firm during lockdown. 

It has also been estimated that Facebook has, in previous years, ended up paying a lower effective tax rate than many small and medium sized enterprises due, in part, to its ability to hire the best tax lawyers. So with a market dominated by tech giants now set to pay a higher rate of tax, will the door be opened for smaller firms?

The UK’s SME sector is among the most important to the overall health of the economy with 99.9% of private sector firms falling within the category. With this in mind, the UK economy will benefit widely from the growth of SMEs.

Small businesses are among the most resilient and determined and so the chance to have a more level playing field in the tax arena will be welcome news. Startups competing in any of the fields that are currently dominated by multinationals affected by this deal may see an opportunity to disrupt in a way that would have been more difficult beforehand. 

The Chancellor has already made it clear that small firms be supported in this sphere by staggering the increase in corporation tax depending on the amount of profit made, and increased tax take from large firms should reduce the burden on the rest of the economy. This remains a complex issue but for disruptors in industries that are led by a giant it looks like good news.

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