Lifting a virtual veil

At the Hay Festival a couple of years back, I heard Google chief executive Eric Schmidt talking about why the company paid so little tax on its UK earnings. “I don’t think that companies should be in charge of this question, I think that governments should be in charge,” he said.

Google, like Amazon, like Apple, and other multinationals, is able to pay lower than its “fair share” in tax because it takes advantage of legal schemes to funnel sales through low-tax countries (such as Luxembourg) and uses complex intra-company arrangements to minimise profits.

In his book The Internet is Not the Answer (Atlantic, February) Andrew Keen tracks how the internet and the web have been coloured by this love of money (see my interview with him here). Instead of greater people power, we have huge tech conglomerates centralising control, run for profit by modern-day plutocrats. For Keen, this is a winner-takes-all economy built on our incessant tweeting and searching—the labour of the masses converted into cash for the few. It’s a powerful analysis. One wants to admire the achievements (Uber, Instagram etc) but one can’t help blanching at the transfer of power.

Keen feels a reckoning is coming, and he may be right. Just this week the chancellor of the exchequer announced a new tax on multinationals that divert profits elsewhere. The devil will be in the detail, but here at last is a government taking charge—as Schmidt advised it to.

In books we have a tech problem of our own—a cheetah among the gazelles. When Amazon started, it was an ultra-efficient distributor of books, taking advantage of being able to pay low wages to unskilled labour with factories part-fuelled by job-creating subsidies. One could marvel at the chutzpah, while enjoying the market growth. But, as Keen says, it has since transpired that Amazon was the pioneer not just in frictionless shopping, but also in what he describes as “robber baron” capitalism.

This may be unfair on founder Jeff Bezos, who Keen also describes as “remarkable”. But there is the problem with many of the tech giants. They do great things, but not without great cost. The Kindle has been the single most important innovation in a decade in books, but one cannot ignore that Amazon uses the device to lock-in writers and readers to its own ecosystem, a kink that undermines many rivals.

The government has finally intervened over tax. Will it also now look to widen its horizons and review how these tech giants operate generally within the sectors they have come to dominate? As PA c.e.o. Richard Mollet says in our 2014 review, Amazon’s recent dispute with Hachette USA has lifted the veil. It is important that we do not let it drop.