Some brief thoughts about an international space tax regime (Part 1 of ?)
Honestly, I'm not a big fan. Here's why.
I should be writing a paper, or doing a bunch of other things that are on the docket, but I am nothing if not amenable to procrastination. So here’s some of my thoughts on an international space tax regime, and why I don’t like it.
Also, this is just part 1, because I realise now that I cannot possibly write everything down today. It’s fine. I’ll pick it up again next week or something.
Death, Taxes, and Space Junk
I want to preface this discussion with a little context. The other day, I was explaining what I knew about the upcoming ClearSpace-1 mission.
In a nutshell, ClearSpace is a Swiss start-up with about 5 people (right now, but they intend to expand to 50 or so). They’ve been awarded a €117mil contract to deorbit a piece of a Vega rocket currently stuck at 660km, using a probe that has 4 robotic arms. The mission will launch in 2025. For more details, check it out here (https://actu.epfl.ch/news/clearspace-1-mission-kicks-off/).
So that’s great. No, really. Space junk is a massive problem and it’s the reason I got into the space industry in the first place. Any effort to try and fix the problem, or at least slow it down, is in my mind a major win for our planet and humanity as a whole. I’m not going to couch my language in caveats about how other issues are also important, because this is my SubStack and I can say whatever the hell I want. And I say: space junk is a big issue that affects everyone on the planet, whether you even know about it or not.
That having been said, that’s a pretty steep price to get rid of 100kg. There’s 8,000 tons of debris up there (approximately, not counting the stuff that’s too small to track). If all if it costs this much to get down, then I think it’s safe to say that it’ll never happen. Even if we leveraged economies of scale and reduced the price by a factor of 1,000, it would still cost nearly $10 billion to bring everything currently up there back down.
And have I mentioned that we’re still putting a ton of stuff up there? Seriously, between smallsat constellations and everyone’s newfound desire to militarise space, we’re putting a lot of tonnage up there. Orbital debris mitigation guidelines, which require entities to bring their stuff back down within a timeframe of 25 years, have an adherence rate of less than 50%. Clearly, the problem is going to keep growing, meaning that the pricetag will too.
Which raises the question: if we’re going to fix this shitshow, who’s going to pay for it?
The Tax Man Cometh
Enter the idea of a ‘space operator tax’. Now I will caveat this with a couple of points. First, there are other ways of conceiving an international space tax regime, but I'm not talking about them right now. Maybe in future. This is however the most useful example because it’s the most immediately relevant - taxing any entities that actually use space.
Second, there are other reasons for suggesting a tax regime in the first place. Most of them are great - my personal favourite is subsidising space trips for everyone so that they all experience the Overview Effect and we can achieve world peace. It’s basically like the ending of Forever Peace by Joe Haldeman. There’s also an argument to be made, at least in my opinion, that a tax regime wherein the capital collected from current space-faring nations (which are, for the most part, more developed) is used to support and build up the space capacities of other generally less developed nations is a tacit means of complying with the very first line of Article I of the OST that declares space to be for the benefit of all States.
However, I just think that there are a couple of teeny tiny issues that render this entire thing unworkable, and if there’s a fix for them, then it’s sure not coming from me.
How2count gud?
First off, quantifying the tax. I’m not a tax guy, and I’ve also never had anything to do with taxes, so maybe an enterprising accountant can solve this issue. In the absence of one however, it seems to be that quantifying the amount to be paid is, at the very least, really fucking hard.
There’s a broad range of different activities in space, each with different purposes, profit margins, and social benefits. While the same can be said of Earth, I would argue that the nature of space activity presents unique challenges.
For example, let’s say a rocket is going up with a payload comprised of different missions. It’s got 60 commsats, intended to join an existing constellation that provides high-speed internet. It’s also got a couple of CubeSats that are experiments for a university. Because there’s a little space, a memorial flight company has also tagged along a couple canisters of cremated remains. Lastly, unbeknownst to everyone else, there’s also a classified military spysat that’s been tucked away in a discreet compartment.
Now it might seem logical to tax the commsats, let the experiments off, maybe charge a service tax or something minor for the memorial flight, and keep the spysat off the books. However, the commsats constitute the bulk of the payload, without which the other stuff wouldn’t be able to go up because rocket launches aren’t cheap, so they need sizeable payloads to carry to become economical. So you can’t tax the commsats too heavily, since they’re doing more than providing a positive externality - they’re literally enabling the other things to go up in the first place.
Now, generally we can agree that we shouldn’t tax scientific research too much because that’s a bad incentive structure. And yes, generally scientific research can be commercialised for great profit, and yet we still don’t tax it. But does this change in the context of space? More importantly, should it? I don’t have that many opinions on this in particular, but it’s important to note that most of these experimental CubeSats lack propulsion or manoeuvre capability, meaning that they can’t perform collision avoidance. That puts other space assets at risk of being damaged or destroyed. That in turn affects the insurance premiums operators have to pay, in addition to whatever they’re getting taxed. Does it then make sense to tax experiments, to take some strain off commercial activity?
On to the memorial flight. Assuming we’re at a high enough orbit, those canisters won’t be coming down for a long time. They serve no functional purpose, meaning they’re pretty much just junk. Resources will be spent tracking the canisters for collision avoidance, and they will generate increased risk, affecting the aforementioned insurance paid by anyone up there. The canisters are pretty much deadweight on the space industry and environment, so taxing them makes sense, and yet instinctively it feels very wrong.
Finally, the spysat. In addition to all the factors that I’ve already mentioned, governmental space activities (particularly those with national security elements) constitute a major part of space. They create the same negative externalities as any other, and without paying taxes, mean that governments could potentially free-ride on the backs of other players. Ironic, yes?
Oh and let’s not forget the guys flying the rocket. And what if the satellites get sold to someone else while in orbit. Should they pay taxes too? Some orbits are more crowded than others, so should they have different tax rates? What if space assets use in-orbit propulsion to change orbits?
I can think of a dozen other issues off the top of my head, but you get my point. I’m not saying that quantifying the correct amount to tax is impossible, just really really difficult. And sure, nothing good comes easily. But there might not even be a point because who exactly is going to tax operators anyway?
Pay your damned parking tickets
The nature of international space law means that most of it is enforced only at the national level. If you developed an international tax regime, presumably administered by a supra-national body or a new organ of the UN, it would still fall to national tax authorities to actually go about collecting money.
So herein lies a few thorny issues. First, no country is going to agree, practically speaking. International cooperation is at a nadir. Space is, regardless of how you look at it, a strategic space. No one’s going to agree to handicap themselves if no one else does. So even if somehow the COPUOS could get together and hash out a space tax treaty and present it to the UNGA, there’s no way the major space-faring nations would sign it, and just like that you’ve got yourself another Moon Agreement. Congratulations, you played yourself.
This leads me neatly into the next point, the ‘Flags of Convenience’ problem. This really isn’t a new thing, and the fact that we still haven’t solved it leads me to believe that this is genuinely unfixable. Countries are incentivised not to regulate in the interest of 1) not chasing away domestic economic activity to more favourable climates and 2) attracting foreign economic activity currently fleeing onerous tax regimes. Realistically, if the major space-faring nations did actually enforce taxation, space companies would just leave. We already see it in regard to registration. Why wouldn’t it happen with taxation? Or, alternatively, you could just be like the Netherlands and straight up refuse to comply because you don’t think you should.
And of course, there would be no negative enforcement mechanism to compel states to pay their damned taxes. It’s ironic that the same problems plaguing the current orbital debris mitigation regime are just as applicable to the suggested space tax regime meant to fix it.
More to come, eventually
Okay I’m going to call it a day here. If you have any thoughts, share them with me and I’ll be happy to talk about them in the next part. Rest assured, I still have plenty more nails with which I intend to pin this idea to the wall.