INSPITE OF GENERATING REVENUE WOTRH BILLIONS OF DOLLARS, AMAZON HAS'NT PAID A SINGLE CENT TO THE AMERICAN GOVERNMENT. PRESENTING TO YOU PART 2 OF THE AMAZON SERIES.
You must be wondering how a money minting machine like Amazon pays no tax to the federal government and even gets away with it. American Presidential candidate Bernie Sanders has made this a campaign point & has promised to reverse this paradox.
Let's see how this happens.
THE REASONS BEHIND ZERO TAXES
The first major reason is that Amazon made losses in the previous financial years. So it carry forwarded the losses and tax credits to offset current income. Those are signals that Amazon accumulated losses and tax credits faster than it generated income and tax liability. The law let companies carryforward tax payments across business cycles in a company’s lifespan.
Another reason is heavy re-investment in R&D. These are steps which lead to growth of the American economy. So the USA government has provisions which reduce tax liabilities if R&D expenditure is up to a certain limit. (The economic benefit of Research & Development is that it leads to innovation, technological advancement & cost-reduction). The graph below portrays Amazon as the global leader in terms of R&D expenditure.
Another reason is heavy investment in infrastructure and real estate. This also attracts tax credits and deductions. This also has a positive impact on the economy as an investment in infra leads to employment creation, attracts foreign investment, increases ease of business, creates supply chains, enhances transportation and even attracts tourists (less plausible in this case).
The last reason is giving compensation to the employee through stock. (Co-Partnership or stock option). Tax deductions increase as the stock increases.
HERE'S HOW AMAZON EVADES TAX IN UK
source the times
CONCLUSION + RECENT UPDATE
I find it embarrassing & sad that a large corporation like Amazon paid no taxes whereas on the other hand salaried classes and small businesses are forced to pay up. Sceptics may say that its due to heavy investment in R&D and infra which has positive economic effects but Amazon also gains benefits by such heavy investment.
However, Amazon finally paid up in 2020. That’s because Amazon actually owed money to the federal government in 2019. After two straight years of paying $0 in U.S. federal income tax, Amazon was on the hook for a $162 million bill in 2019, the company said in an SEC filing on Thursday. Of course, $162 million is still just a fraction of the $13.9 billion in pre-tax income Amazon reported for 2019 — roughly 1.2%, in fact. The federal corporate tax rate is 21%, but as in the past, Amazon likely employed various tax credits and deductions to reduce its federal tax bill. Amazon also reported $280.5 billion in total revenue in 2019.
THIS MAY SEEM UNFAIR & DISTURBING BUT THAT'S CRONY-CAPITALISM FOR YOU.
ON THAT NOTE, I AM DONE FOR THE DAY.
STAY SAFE PEEPS.