Imagine doubling your company’s profits to $ 11.2 billion in 2018 from $ 5.6 billion the previous year and still not paying a single penny in taxes, sounds good, right?
Such is the case with Amazon, which instead of paying the legal income tax rate of 21% on its income. In 2018 it reported a refund of federal income taxes, estimated at 129 million dollars.
That is, a tax rate of 0-1%.
This is attributed by Amazon to unspecified “tax credits” and a tax cut, for executive stock options, on its income statement.
How Amazon Paid $0 in Taxes
Amazon has also not paid income taxes in its country this year despite earning 11.2 billion dollars in 2018. And it is already three years in a row in which it is fought. But in addition, he has received money from the US government as “reimbursement”. For the losses accumulated in previous years when the company was not profitable. How is it possible?
According to a report from the Institute for Taxes and Economic Policy (ITEP), Amazon is not the only company. Netflix hasn’t done it either despite record earnings last year. Netflix has disputed this information but the ITEP report states that the $ 131 million paid by the company has been in foreign taxes.
And the key to it all is in Donald Trump’s Tax Cuts and Jobs Act (TCJA) of 2017, the accumulated losses from the years in which the company was not profitable. The tax guarantees for investments in R&D and share-based employee compensation. All of this has helped the company.
Currently Amazon’s tax liability is 21% (down from 35% in previous years). But with the help of tax breaks from Trump’s Act, Amazon hasn’t paid a dollar this year.
Criticism of Jeff Bezos
From ITEP they explain that… “It is difficult to know exactly what they are doing” because all are public documents, which exposes their financial status. Therefore, it is “not clear” which loophole the company is taking advantage of. Although Amazon has benefited from loopholes available under the TCJA, “this is not the first year” that it does.
For its part, Jeff Bezos’ company has detailed in a statement that it “pays all the taxes it must pay” in the US and in all the countries where it operates.
The Amazon revelations come despite President Trump’s criticism of Bezos for not paying enough taxes. The president had promised that his new tax law would put an end to these loopholes, ” but it is clear that this is not the case,” they have clarified from ITEP.
But if anyone thinks that this is new, it certainly is not. Since the Institute of Taxes and Economic Policy have added that several corporations. As Amazon has avoided paying income taxes over the years. Despite the fact that companies such as Amazon have been consistently profitable. And for this they should be paying.
Tax History Repeats
With regard to income taxes in the US, although Amazon’s taxes are not public. Its presentation before the SEC (the American regulator) in 2017. Shows that the company has used the new Trump Law to advantage.
SEC accounts don’t require a company to specifically list all of the discounts Amazon uses. But there are several avenues Amazon followed last financial year that could have worked for it again this year. For example, the company did pay taxes in individual US states and international jurisdictions.
Additionally, publicly traded companies can benefit from share-based employee compensation. While it is impossible to know the exact amount of money. That Amazon has or has not paid to the government with reference to the last two years. The local magazines has recently revealed that it is paying an income tax rate of 1% this year. Even after having paid more than 11% between 2011 and 2016.
Amazon Sales Record
Much has been said these days about Amazon’s record sales figure in the year of the pandemic. The step backward that Jeff Bezos intends to take has also made many headlines. Leaving the position of CEO to current head of cloud computing unit. Andy Jassy in the third quarter of 2021, moving to the position of CEO of the board of the company.
But much less has commented on the amount of taxes that Bezos’ multinational has paid during that period. The unified accounts published this week, in which the results of all Amazon subsidiaries are added without breaking down country by country, show the total figure that the company provides for future tax payments and the true cash flows that are destined respond to the finances of the countries in which it operates. The two figures are ridiculous if we compare them with the tax rates. That any SME would pay in a country like India or any other territory that does not apply aggressive tax rates in Corporation Tax (IS).
Total Amazon Sales Globally
With a new world sales record of 386,064 million dollars in 2020, 37% more than the previous year, the multinational Bezos has obtained profits of 24,178 million dollars, 72% more than 2019. According to the financial summary itself from Amazon, the company has provisioned (the future payment noted in its books) 2,863 million dollars in payment of IS globally, 11.84%. But the same accounts show that the cash flows of payments for this same concept have been 1,713 million dollars, only 7.08% of its profits in the period.
Looking at the results of the previous years, you can see the real figures of tax payments during the last years and an increasingly downward trend. In 2016, Amazon showed timid profits, compared to the current astronomical figures, of 3,892 million dollars worldwide. That year, the company only paid 412 million IS, 10.59%.
In 2017, the implementation by the Trump Administration of The Tax Cuts and Jobs Act (TCJ Act), a kind of tax pardon for large companies to repatriate money to the United States, led large technology companies to move thousands of million from other countries in exchange for paying a tax rate of 15.5% for cash and equivalents and 8% for liquid assets.
In 2018 the IS payments added from all countries represent 10.51% of its benefits, in 2019 it paid 6.3%
Profit of Amazon
After 2017, Amazon’s profit has not stopped growing, but the percentage of that profit that ends up being paid in the tax agencies of those countries where it operates has not stopped decreasing. In 2018, IS payments added from all countries represent 10.51% of their benefits of 11,261 million dollars. The year before the pandemic, Amazon earned 13.976 million dollars and only paid 881, 6.3% of the total.
If we take the average of the last five years, Amazon has only paid 9.24% of its results as IS. Of a profit of 58,681 million dollars, the countries entered only 5,420 million. If we remove from the average the result of 2017, in which they paid for the tax of capital, the amount paid in four years is only 7.86% on average of the total.
Amazon in India
Despite being the new leader of online commerce in India, Amazon’s tax bill with the Indian treasury is ridiculous. In 2019, the Indian subsidiaries of Bezos’s company declared only a profit of Rs 4,000 crore and paid Rs 600 crore in profit taxes, 19.1%. This is the result of the three Indian subsidiaries, one managing logistics, another managing data and one for commercial support. The only customer of those three subsidiaries is Amazon’s own parent.
In this way, the total sales and profit margins obtained by the multinational in India are completely diverted to the headquarters, a country where hardly any taxes are paid on the income obtained in other countries. In a very similar way to the advantage tax provided by the Netherlands for royalty income or other trademark rights. The payment of 19.1% in India of a very low profit from its logistics subsidiaries and the continuous diversion of profits to territories such as Luxembourg, the Netherlands, Ireland or the Bahamas explains the minimum percentages of IS that Amazon pays globally, like 7.08% in 2020.
The tax structure of Amazon and the rest of technology
There is no magic, only fiscal engineering, territories with much lower tax rates. And the techniques used by large multinationals to divert profits to those countries. The big tech giants, led by Google, Apple, Facebook, Microsoft. Netflix and Amazon itself, are the main, but not the only companies taking advantage of the new digital economy. And tax engineering techniques to lower their global tax bill to the minimum.
According to the report The Silicon Six on $ 100 billion global tax gap by the British organization Fair Tax Mark. There is a huge gap between the effective tax rate paid by these companies and the average tax rates paid by other companies.
But, in addition, he also finds a huge difference between tax provisions (the 2,863 million dollars provisioned by Amazon in 2020). And what they actually end up paying (the 1,713 million). The organization’s calculations for these six giants, the difference between general rates and taxes actually paid, was $ 155.3 billion between 2010 and 2019. The difference between tax provisions and taxes paid was $ 100.2 billion in that same period. Amazon was the worst of all in that period, they point out from the Fair Tax Mark.