How to tax businesses in orbit and beyond
May 28th 2026|Earth|4 min read
Listen to this story
IN 1587 THE English jurist Sir Edward Coke popularised the legal principle that whoever owned a piece of land also owned the space above it “up to the heavens (and the stars) and down to hell”. Hell may yet be remote, but lately the stars have become more accessible. For much of the 20th century space exploration was a public affair handled by governments and directed toward scientific research. Increasingly it has become a private business filled with commercial aspirants.
The industry’s top firm, SpaceX, Elon Musk’s soon-to-be-listed rocketry venture, seeks to establish a city on Mars. Others hope one day to run interplanetary package holidays or mine asteroids and the Moon. The commercial space sector’s annual sales could reach $1.8trn by 2035, reckons the World Economic Forum, the non-profit behind the Davos plutocrats’ retreat. As it grows, it is set to give tax collectors a headache. That is because existing space law was crafted for a world in which the heavens were the province of governments. It is less-suited for a world of space capitalists seeking profit among the stars.
The legal regime that governs space dates to 1967, when dozens of governments signed the Outer Space Treaty. They agreed that each vessel heading into space would register with a nation, whose laws would apply to it and who would take responsibility for negative externalities, such as debris, its activities generated. The agreement made clear that, contrary to Coke, countries did not control the vertical territory above them beyond a certain point. Today governments mainly tax space companies on their earthbound activities, as with America’s recently announced launch fees, which are levied on firms based on payload.
At times countries have poked at the treaty’s principles. In 1976 a group of equatorial ones declared sovereignty over the geostationary orbit above them, which many satellites use. (They soon abandoned the idea.) Countries such as China and India have mulled theoretical tax powers over income generated in space. In 2001 a Los Angeles County bureaucrat attempted to tax satellites. And every spacefaring government has eschewed an international agreement against commercial use of the Moon—a form of space capitalism on which Donald Trump’s administration has been particularly keen. Yet most attempts to assert taxing powers or sovereignty over space itself remain theoretical.
As corporate profits from space balloon, that may change. For a start, it would help to establish what counts as space. No one really agrees where it begins; the United Nations has suggested 100km above mean sea level. But that is chiefly for scientific purposes, not fiscal ones.
Tax authorities then have two options for how to respond. The first is to assert tax powers over vessels registered in their country after launch. That approach might lead companies to employ a strategy common on the high seas called “flag of convenience”. Firms could register their spacecraft in a low-tax jurisdiction in order to avoid future levies—or even attempt to launch them outside any country’s territory. Some five space launches have been registered in the Cayman Islands, notes Jonathan McDowell, a retired astrophysicist formerly of Harvard University. But existing tax treaties are used to dealing with earthly havens through established tests such as looking at where a firm designs its spacecraft and where its executives live.
Tax havens among the stars will prove trickier. That raises the second option for policymakers: to revisit the notion of sovereignty. Doing so would help deal with economic activity that occurs entirely off Earth, no longer a sci-fi scenario.
For example, Axiom Space, a startup, is attempting to launch a private successor to the International Space Station. If two people begin a business aboard it or another private space vessel, it is unclear who will tax them, particularly if they are not nationals of the country to which the vessel is registered, remarks a forthcoming paper by Erika Scuderi of the University of Florida. As humans are able to spend more time aboard space stations, they might also lose their previous tax residency. If Mr Musk achieves his dream of a self-governing city on Mars, Earth’s tax collectors will want their share.
The possibility of income generated with no true connection to Earth’s sovereign territories makes the case of space harder than that of aviation, the sea or the ocean floor. Space is likewise not perfectly akin to Antarctica. The treaty that governs the southern continent is much clearer about sovereignty; it froze a 1959 status quo in which seven countries claimed territory on the continent. Countries are also not as inclined as they were in the mid-20th century to follow international agreements. As profits from space become more than theoretical, simply asserting that they belong to mankind will create a pool of untapped revenue. The temptation to carve up the heavens and heavenly bodies may then prove irresistible. ■
For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter.
This article appeared in the Finance & economics section of the print edition under the headline “Tax heavens”
From the May 30th 2026 edition
Discover stories from this section and more in the list of contents
readers loved this