Is it time to talk about who pays for the pandemic?

Across the Channel, the sensible part of Europe has been giving some thought to the future, and the need for countries to raise revenue to pay for the borrowing binge necessitated by the pandemic.

To that end Paolo Gentiloni, the European Commission’s economics commissioner, told the Financial Times that Brussels wants member states to root out the structures that facilitate aggressive corporate tax planning. If they don’t it may seek to force the issue.  

As the working week drew to a close, the commission also launched an appeal against the EU’s General Court ruling in favour of Apple and Ireland, where Dublin is in the perverse position of fighting a demand from Brussels that the tech giant pay €14.3bn in back taxes to the Irish exchequer.

Competition commissioner Margrethe Vestager argues that the sweetheart tax deal granted to Apple was sweet enough to amount to illegal state aid. The court said the case wasn’t proven to “the required legal standard” which was basically an invitation to get back into the ring.

The backdrop to this is the mounting pressure for corporations and the wealthy to bear a greater share of the burden of paying for the pandemic when the time comes.

Come it will. The borrowing numbers are eye popping. Back here, there was inevitably some twittering about the UK’s ballooning to £35.9bn in August. 

However, when I asked an economist of my acquaintance, one who lives in the sensible and pragmatic part of the profession, about when there might be a need to address this his response was “at the moment [there’s] absolutely none”.

He later apologised because he thought he was being flippant. He needn’t have because he wasn’t. His answer was succinct,  to the point and on the money.

With the new pandemic related restrictions in danger of snuffing out the UK’s recovery, now is not the time to be taking the fiscal foot off the gas. Au contraire. The same is true in other nations where it has roared back.

The numbers might look enormous, but government debt is currently cheap to service and is likely to remain so for some time with low interest rates set to be with us for years. Some even say decades.

And given the current economic situation, now is no time to be debating when to start a fiscal retrenchment. But it’s a different story with the how. That is worth discussing, which is why the EU’s moves are worthy of note.

Sweetheart corporate tax deals in which countries engage in games of beggar thy neighbour are a fine entry into a discussion about corporate tax rates. 

Some companies have benefitted handsomely from the pandemic. Apple is among them. But bumper profits made by tech have not been earnt. They are a windfall delivered as a result of large parts of societies and economies being shuttered. 

Some of that windfall now needs to be redeployed into the rebuilding process, both fiscal and societal, that will be necessary.

Others companies have, meanwhile, benefitted from unprecedented support; tax holidays, wage subsidies, cheap, government guaranteed credit. All very necessary given the need to keep people in work and to stave off the very real threat of some sectors simply falling to pieces.

But having had their losses socialised, the same should hold good for a higher proportion of their profits than at present, with the money recouped through the tax system.

Fiscal burdens have, over many years, shifted from corporate to personal. Britain too has played the game, repeatedly, and loudly, trumpeting its low rates by comparison to comparably sized economies.

Its true that the corporate sector cannot shoulder the burden on its own. 

There is a very strong case for greater use of wealth taxes, and more green levies wouldn’t hurt either, given the beneficial pay off that could flow from them. 

At the same time, there is no good case to be made for cutting public spending, especially here in the UK. This country spent 10 years doing that, and the results may in future make a good case study for why austerity is utterly self defeating. Drawing a line under it is a rare example of Boris Johnson getting something right. 

This is is a debate that is only slowly getting started, but even in the midst of the pandemic, it’s worth having. 

When the how has finally been settled, we can move on to a discussion about when to get started. But for now that can wait.