So it’s been a quick minute since I last discussed the possibility of an international space tax regime. What’s new with you? Me? Oh well I published a couple of times, delivered some presentations and lectures on space law, and spoke at the UN. You know, the usual. Okay seriously though I still think space taxes are a bad idea, and now with the benefit of experience, I fully intend on getting real spicy with my takes.
Space Junk 2: Oh Shit It’s Still Here
Yeah so no surprise, the volume of space junk hasn’t really gone down in the last 10 months since I talked about this. Astroscale (finally) launched its first test flight and it mounted its magnetic plates onto OneWeb’s sats (efficacy still to be determined).
But I think the major thing on everyone’s mind is the uncontrolled re-entry of China’s Long March 5B booster and its fall into the Indian Ocean off the north coast of the Maldives. I’ve had this incident brought up to me several times now, sometimes with people panicking about the (remote) prospect of getting hit by space junk, to which I have consistently said: at least the damned thing came down.
As I mentioned the last time around, there’s 8,000 tonnes of debris whizzing about at 8,000m/s in Low Earth Orbit (100-2000km in altitude) alone. So the major question is still how are we going to pay for orbital cleanup. “Oh that’s easy, let’s just create a space tax.” Except it’s not easy.
As a recap, the last time around I said that an international space tax regime is a bad idea because:
It’d be practically impossible to quantify taxable amounts;
Taxes would be ultimately disproportionately harmful to a lot of other actors because of the interdependent nature of a lot of space activity;
No international consensus means the onus falls on national governments to come up with taxation regimes, which is infeasible; and
It’s unrealistic to expect national governments to want to unilaterally handicap their own commercial space capabilities?
Now we’re going to cover some additional problems with proposing an international space tax regime, namely:
Impossibility of administration;
Enforcement is hamstrung by the Outer Space Treaty itself; and
Encourages anti-competitive behaviour.
It’s always ‘Who is Space Taxman’ and never ‘How is Space Taxman’
Let’s say you could actually get states to agree to tax their commercial space industries. And let’s say you could figure out a system for calculating it that takes into account all the factors I brought up last time around, such that the quantum is representative of the environmental strain any particular activity imposes. Let’s say all countries actually go through with it so that commercial space companies can’t just abscond to some other jurisdiction with more favourable conditions.
Congratulations, now all these governments are sitting on piles of space tax money, presumably ready to hand them over to the Space Taxman.
The question then becomes who is most competent to actually administrate this tax regime and ensure that its proceeds go toward just causes. It definitely can’t be any particular nation. It probably can’t be a coalition or intergovernmental organisation either, because much like other multilateral bodies, they’re likely to get stymied by individual states’ representatives looking out for their own national interests first.
So maybe we look at an international organisation made up of experts, or something like the International Telecommunications Union (ITU) which also performs various administrative functions within the space sector. Maybe we create one from scratch because we can’t possibly be dumping this onto the ITU too. Let’s call it the Space Tax Agency (STA). What is the mandate of the STA though? Knowing how space works, probably something that has to do with the ‘betterment of humankind’ or ‘ensuring space can be used to the benefit of all of humanity’ or something equally waffley like that. A lofty goal however does not guide expenditure.
There are many possible uses for the tax proceeds, all of which are fundamentally noble. Clean up space junk, send kids to space, provide cheap and reliable internet to all corners of the globe through subsidised services, distribute to poorer nations to aid in capacity building, etc.. You get the idea. The mandate of the STA will therefore guide what use the proceeds are put toward. The thing is though that unlike the taxation of private citizens, there is no real way for the STA to compel payment from member states, so if any of them disagree with how the proceeds are being spent, they can just withdraw from whatever agreement gave birth to the organisation.
Also, national governments change. Priorities change. A country that might have been all for space taxes to fix space junk might suddenly realise that, you know what, it would like some funding assistance in getting its small launch program off the ground. The fundamental basis of international law is voluntary participation, meaning that there isn’t a damned thing that the STA can do to actually enforce tax payments, short of literally conquering any states that defect through armed force (which is also very illegal according to the Law of Armed Conflict by the way). While all of us are born into societies and sets of rules that bind us from day one (John Locke fans what up), the same simply doesn’t hold true for nations.
No Step on Space Snek
So the STA lacks any substantive teeth to compel countries to cough up tax payments. There is however also an argument to be made that it is straight up illegal for the STA to demand mandatory payments in the first place. Again, the fundamental basis of international law is voluntary behaviour. No state’s sovereignty should be subordinated, and the act of compelling an action is an act of subordination.
Beyond that, Article I of the Outer Space Treaty very clearly declares a principle of freedom of exploration and use of outer space. It is one of the most basic tenets of space law: that all are free to use space, and more importantly, by implication no single entity is allowed to prevent another from using it.
Generally, how do you enforce a demand? By depriving the demandee of the thing that they want until they yield to the demander. If the entire basis of the STA and its tax regime is voluntary payment, and everyone gets along and complies like good little nation states, then we won’t have an issue; in an ideal world every country would cough up the correct amount on time, every time, and we’d all get along royally. But when we look out across the international landscape, do we really believe this is a tenable scenario? More importantly, do any of the countries who might be considering this approach believe it? This makes me think of Joel Feinberg’s ‘Nowheresville’ thought experiment: basically if there was a perfect world with no rights, but everyone lived happily, would you still demand that laws be put into place to protect against trespasses?
Also, can you even really call it a taxation system without a means of enforcement? It’s more like some weird guilt trip-induced charity scheme right? In my mind, a taxation scheme without a means of enforcement is an exercise in futility, and if having a means of enforcement is illegal by default, then either the law must change to accommodate it at such a fundamental level that all other laws are thereby affected as a result (think Constitutional amendment level), or it is a foregone conclusion as to efficacy.
Low Earth Orbit is the new Park Avenue
Finally, the classic argument against taxes: monopolistic behaviour and market dominance by larger companies. Now this one’s interesting, because you have to understand the way that space is currently structured. The legacy aerospace companies like Boeing and Lockheed go way back with the government. Their hands go deep into those pockets. If today they were to advocate for a certain amount of taxation, they’d rest assured that they probably will still have sufficient cash flow to turn a profit. No such guarantee exists for smaller space companies.
Space companies like satellite operators and launch providers aren’t making any money whatsoever if they aren’t in space. That’s why launch delays are so deadly - because every day spent without an asset in orbit generating value is another day burned. A space tax disincentivises going to space by putting a price tag on it (as if going to space wasn’t already expensive enough).
Now a large company with fat government contracts is likely to be able to take it. Hell, they might even get a tax break for sending up government assets to begin with. But a small constellation operator is going to be hurting, especially because they’re assuming an enormous amount of risk to begin with. 10% of satellites fail upon insertion into orbit. That’s a lot of wasted money and effort, forcing the remaining 90% to make up for it. Now if you slap on an additional cost in the form of tax, well, you can kind of see how you’re choking out the little guy here.
Could we then just tax companies based on size? We could certainly try, although size doesn’t affect 1) how environmentally damaging (or beneficial) their activities are and 2) it is nonetheless limited in scope because it would fail to account for all the non-corporate actors who are also performing detrimental activities. Unlike with terrestrial pollution, the objective here is not the establishment of a tax as a ‘retributive’ measure. Very little is gained from punishing actors who have behaved poorly, and from that perspective, any sort of disincentivising measure misses the point. Worse still, it instils a false sense of progress or accomplishment. We achieve nothing from gathering a big war chest of tax money. The point is still to preserve and protect the space environment.
I’m not going to claim that taxes disincentivise entrepreneurship or innovation or any of the other classic arguments fielded against real world taxes. We’re here to talk about a fantasy space tax, and the way I see it, a space tax would actually function as a disincentive to go to orbit, and fewer companies will be able to shoulder that additional cost. Companies are however the ones providing a lot of good in the technological race toward sustainability, and if we slap on an additional cost to what is already a challenging prospect to justify to private investors economically, we might be doing more harm than good.
And that concludes some of my thoughts on space taxes today. I have more, don’t worry. They’ll come in due course.