Taxing Tech in Age of AI Could Fund Human Rights

Sarah Saadoun is a senior economic inequality adviser at Human Rights Watch.

Fears about the economic fallout of artificial intelligence have brought tax policy into the spotlight. Governments could find themselves desperate for more revenue to support millions of potentially laid off workers at exactly the same time that they are losing the taxes those vanished jobs would have generated.

There is no magic bullet governments can use to resolve this problem. One approach with growing support is to better tax AI profits. The idea is that governments could use that revenue to help manage the human rights impacts of rapid, AI-driven change. This approach has support in some surprising quarters. Anthropic and OpenAI have both floated proposals that would increase taxes on companies benefiting from AI as part of their case for widespread adoption of AI.

The current international tax system doesn’t allow states much room to do this effectively, however. A century-old rule common in bilateral tax treaties requiring physical presence puts tech profits and gains largely out of reach for most of the world’s governments, which was a growing problem even before the advent of AI. A change requires a much larger, collective solution to the larger failings of our global tax system. Luckily, it is already taking shape.

Dozens of governments are negotiating a landmark UN treaty that could finally make it easier to tax tech companies, among other badly needed global tax reforms. Not only could this treaty better equip governments to weather AI-driven uncertainty, but it could give them essential tools to better protect and realize human rights across the board.

Rules for cross-border taxation set out in the 1920s and fine-tuned by the Organization of Economic Cooperation and Development (OECD) form the basis of thousands of bilateral tax agreements between countries. These treaties generally let governments tax a foreign company’s profits only if it has a “permanent establishment”—a physical presence—in the country.

This means tech giants like Meta or Uber, which often operate entirely remotely, can earn fortunes in a country while paying tax on profits somewhere else entirely. For instance, Facebook has some 65 million users in Bangladesh, more than one-third of the population, yet has no local office.

A 2025 analysis of the “Silicon Six” found that these tech giants earned nearly half their $11 trillion revenues overseas between 2015 and 2024, yet only 30 percent of what they reported in estimated taxes was booked to foreign governments—disproportionately tax havens. For Global South governments especially, this increasingly adds to larger problems with an international tax system that hampers their ability to adequately fund human rights imperatives, such as education, health, and an effective justice system.

The digital economy now makes up 15 percent of the global GDP and is growing fast. If even modest predictions of AI’s transformative impact pan out, the cost of the old tax rules to government revenues—and to rights—will significantly grow.

Attempts to get around these rules, including by opting out of bilateral tax treaties that impose the constraints, typically yield relatively modest gains because, on their own, governments struggle with enforcement. Unilateral measures also make governments vulnerable to retaliation by other governments, particularly from the United States.

This is one reason why many governments have banded together to push for a first-ever UN tax treaty. The US has walked out of negotiations, but dozens of other governments are hammering out an agreement that could be adopted in 2027. One of its key issues is how digital services are taxed. African countries, for example, have proposed allowing governments to also tax companies where payments and market engagement take place. This could include, for instance, social media advertisements, digital subscriptions, and digital labor platforms.

The treaty also aims to tackle other obstacles to fairly taxing companies, like profit-shifting to tax havens and tax systems that struggle to cooperate across borders.

Kenya’s uphill battle to tax tech illustrates why this matters. Although the country’s economy has grown over the past decade, between 2019 and 2022 the number of Kenyans living below the national poverty line increased by approximately 4 million. At the same time, government spending on public education and health fell well below best-practice global benchmarks. In fact, education spending as a share of GDP declined.

In Mathare, one of the largest informal housing settlements in Nairobi, residents have fought for years to get even a single public elementary school built in an area with 100,000 people. Jack Owuor, one of these residents, explained to me that he had no choice but to pay for private schools for his children, like a growing number of Kenyan parents. Another resident said she has been denied medicine for her asthma because she couldn’t pay.

A key problem is the challenge Kenya faces raising revenues, although other issues are also to blame. One way Kenya has tried to increase its revenues is by taxing its digital economy, a fast-growing sector that is expected to contribute $5 billion to GDP by 2028. This doesn’t distinguish between national and foreign firms, but Kenya struggles to effectively tax those based overseas.

Kenya does not have a tax treaty with the US, where most tech giants are headquartered. In 2021, the government put in place a 1.5 percent digital service tax on non-resident providers like streaming platforms, ride-hailing apps, and online marketplaces. Annual revenues from the tax have gradually increased, but in 2024 it still only brought in $5 million. In December 2024, it replaced this tax with an effective 3 percent levy on the gross digital revenues of foreign providers. Figures from Kenya’s revenue authority indicated that these taxes generated a combined $12 million in the fiscal year that ended in June.

These are positive steps given the limitations, but a drop in the bucket relative to the scale of the need—or the sector’s size. Kenya also faces stiff US pressure that has pushed other countries to withdraw similar taxes. A country acting alone can only do so much. It would take a global fix to enable governments to tax global tech firms in a way that reflects the scale of their domestic economic activity and profits.

The difficulty of taxing tech and other company profits means higher taxes on regular people, especially since an IMF program that ran between 2021 and 2025 required the government to hit revenue targets. In 2023, Alfredo Akeyo, who also lives in Mathare, said that price increases for public transportation following a new fuel tax meant that he was sometimes unable to send his children to school. The following year, a proposed tax bill that would have raised taxes on things like cooking oil and sanitary pads sparked nationwide protests.

Kenya’s situation is not unique. Even in a decade marred by a pandemic, wars, and inflation, nearly all governments saw their GDP rise, many significantly. But these gains often have not translated into better fulfilment of people’s rights in part because an outdated global tax system makes it difficult for governments, particularly in the Global South, to raise enough revenue. According to the International Monetary Fund, 71 governments have tax-to-GDP ratios below 15 percent, which it considers the “tipping point” for funding essential services.

People have paid the price through their governments’ inability to fund key services their human rights depend on. Between 2019 and 2022, 37 governments decreased their spending on health care per capita in real terms; four of five people worldwide now live in countries where public health spending is below the widely accepted benchmark of 5 percent of GDP. According to the World Bank, education spending per child has either decreased or stagnated globally. And about half the world’s population lacks any form of social security benefit, contributing to an estimated 336 million more people—equivalent to the population of the US—experiencing food insecurity than before the pandemic.

The UN treaty could help turn the tide. It is a landmark opportunity for governments to come together to decide on a better global tax system, one that also adequately deals with multinational tech companies.

But if policy debates about taxing AI continue to narrowly focus on the US and other rich countries, they will leave out governments already struggling with tax rules that will leave them at a profound disadvantage in this new policy arena. It is worth heeding their hard-learned lessons, and these states deserve a solution that includes them.