Corporate czars, would you pay a tax for Mumbai?
To an urban affairs chronicler, developments this month in far-away Seattle, Mountain View and Cupertino – American cities that are headquarters to the world’s biggest corporates Amazon, Google and Apple respectively – opened up a new debate about the role of businesses in urban growth. Do cities attract large businesses because of their inherent strengths and benefit from them? Do large businesses skew a city’s spatial-financial-demographic spread in favour of those with formal sector well-paid jobs; if so, should these businesses be made to pay towards urban regeneration?
Seattle’s city council voted to approve a bill to charge the “Progressive Tax on Business”. The new law means corporates with more than $20 million in annual revenue or the top three percent of Seattle’s highest grossing businesses would have to pay an annual tax of $475 per employee; this fund would be used exclusively for affordable housing and the homeless, according to American media.
Some 500 businesses across sectors would have to pay this tax, nicknamed the ‘head tax’, but Amazon would be the hardest hit because its employee roll-call is long. It is projected to pay more than $12 million per year – chicken feed for a company worth over $600 billion. But this soured the relationship between the corporate and the city. Amazon halted work on its second office in Seattle which would have employed another 7,000 to 8,000.
City officials believe that high property prices and homelessness in Seattle are indirect outcomes of fast-rising cost of housing and services, spurred by the growth of large businesses which drove out the less well-to-do to the city’s margins and made the city unaffordable for many. Thousands of new but high-skilled jobs are created every month which drive up the demand for civic services; it is proper to charge the ‘head tax’ to offset the impact, they argue.
Mountain View and Cupertino in California, headquarters of Google and Apple, are considering similar measures. The money raised through ‘head tax’ could finance the cities’ problemstied to rapid and unimaginable growth such as unaffordable housing, traffic congestion, and insufficient amenities. This is important especially for citizens who are not part of the phenomenal growth story; the city councils, as in Seattle, believe that the corporates ought to contribute to ease the problems.
The corporates, expectedly, are upset. Amazon’s representatives stated that the company was “apprehensive” about the future given the city council’s “hostile approach and rhetoric”. The anti-taxers point to the philanthropic support it offers to homeless shelters in Seattle. Similarly, Google and Apple say they have donated to community groups and invested in transport solutions in their cities. But city councils are saying that’s not enough, a percentage of their enormous - often untaxed - profits must be ploughed back.
This is, indeed, a progressive urban reform. But it court hurt cities too by driving away the big businesses. It is tempting for administrators to home in on large corporates to shore up their revenues, especially if they are high growth ones which have altered their demographics. Think Parel or Bandra-Kurla in Mumbai as examples of changed urban space and new problems. If businesses or sections of industry have benefited by locating themselves in a city, it’s fair – though unpopular – to argue that they must contribute to alleviating some problems that they might have unwittingly created along their growth path.
Mumbai is the most globalised city economy in India, home to large finance and stock-broking firms, law and IT companies, jewellery, entertainment, pharmaceutical and retail giants. Nearly 20 multi-nationals have their headquarters here, so do half of India’s 51 largest companies, according to a business report in 2014. It is also a city coming apart at the seams.
Corporate head honchos constantly complain that the city’s infrastructure does not match up. The necessary upgrade is primarily the state or city government’s responsibility to be undertaken with public funds. But why should the big businesses not be taxed, not contribute beyond beautifying traffic islands? The Seattle-Amazon story has opened up possibilities across the world.