During FY2018, Amazon reported total revenue of 10.7 Billion USD. Valued at 800 Billion USD, Amazon is a mammoth of a company, with its founder and CEO, Jeff Bezos, named the richest man alive. Moreover, its profits in FY18 were reportedly 11.2 Billion USD, indicating a whopping 98% in YoY growth. Now, when a company is pretty much rolling in money, you would expect that their taxes are also very high. But, this is not the case with Amazon. This global e-commerce giant pays 0 USD in taxes.
A report released by the Institute on Taxation and Economic (ITEP) policy confirmed that Amazon has enjoyed a second consecutive year of paying 0 tax. While the company pretty much doubled its revenue from 2017-2018, they are still liable for no taxes. How is this possible? Amazon leverages various tax exemption laws, tax credits, loopholes, and rebates in order to achieve this. In fact, the company even reported a total tax rebate of 120 Million USD to the income tax office in the US. Let us find out how they managed to achieve this feat.
How can Amazon not be liable for any taxes?
Amazon explained to government officials that it did not owe any taxes mainly because it had recently suffered a depreciation of assets and saw deductions for stock-based compensations. Amazon received a ton of backlash for this. In 2018, it was reported that the company owed 322 Million USD tax to the US and 563 Million USD to the rest of the world. But, by talking about the exemptions that they are liable for, they have definitely angered a lot of people as they feel the company is guilty of tax avoidance.
One of the main spokespeople for Amazon, Jodi Seth, has talked about the same by trying to downplay the issue. He talked about how much income-generation has happened in the US due to the jobs provided by Amazon. He also went on to say that Amazon’s contributions to the US’s economy were tremendous, thus implying that this should allow them to get away without paying their taxes. Moreover, he also spoke of the 125 Billion USD investment that Amazon had received in 2011, and explained how a huge amount of that money went into building a strong network of delivery stations, cloud solutions, 125 fulfillment and sortation centers, and so on.
Elaborating on the tax issue, he said: “Corporate tax is based on profits, not revenues, and our profits remain modest given retail is a highly competitive, low-margin business and our continued heavy investment.”
We are not sure why they think that a profit of 11.2 Billion USD falls under the category of ‘modest profits’, but that was all Jodi Seth had to say about the matter.
Donald Trump has been blasting Amazon over Twitter regarding their policies of avoiding their taxes. Though these tweets brought down Amazon’s share by 9%, they did little else to convince the giant to pay up. By employing a legal team whose job is to figure out what corporate policies to use to help them invade tax, Amazon has consistently been under fire for tax avoidance. Now we know how Jeff Bezos surpassed Bill Gates to become the richest man in the world!
Is Amazon Breaking the law?
Not really! One would think that when companies do not pay their taxes, they come under the government’s microscope and are forced to pay up. But, interestingly, Amazon is not breaking any laws. This is because the Tax Cuts and Jobs Act of 2017 introduced many different loopholes and exemptions due to which highly profitable companies like Amazon can get away with avoiding their taxes. They also reduce corporate tax rates in America from 35% to 23%. So, even though Donald Trump routinely tweets about Amazon’s tax avoidance behavior, he is the one who has made it easier for the company to not pay a single penny to their local or state governments.
Due to the Tax Cuts and Jobs Act of 2017, it is highly likely that Amazon will not face any legal pressure to pay their taxes, which means that the company can get away scot-free!
The picture of frugality
Amazon has always been the picture of frugal business choices that allowed it to improve its profits and grow its name. So, looking for ways to avoid paying taxes or at least lower their taxes definitely falls under the realm of things that this company would happily do. To be fair, if US’s laws have provided companies with loopholes to avoid taxes, then these companies are not the ones that should come under fire. The media needs to question the government’s actions instead because the only thing Amazon is guilty of is looking after itself!
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