WASHINGTON – Amazon.com Inc.,
Often quoted by Democrats in their calls for a corporate tax hike, the company saw its tax liability spike last year as it thrived during the pandemic. But the tech giant and others who like him could expect even higher tax burdens under the Biden government’s plan for a minimum tax rate for profitable businesses.
Amazon reported a current U.S. tax liability of $ 1.8 billion for 2020, a departure from the tiny or negative tax charges posted in previous years. The company said an increase in pre-tax income last year mainly resulted in a sudden surge in reported tax expense.
In political debates, Amazon’s taxes have often been reduced to allegations that they pay nothing, and that has long been an over-simplification. Still, democratic control of the House, Senate, and White House could be of great concern to the company. If President Biden’s proposed 2020 minimum tax had been introduced, Amazon’s cash taxes would have been roughly twice as high as advertised, according to an estimate by Martin Sullivan, chief economist at Tax Analysts, a nonprofit publisher.
Amazon’s current U.S. tax charge, an accounting measure closest to the U.S. tax charge for 2020, was $ 1.835 billion on an income of 20.2 billion, according to financial statements filed with the Securities and Exchange Commission this week Billion dollars. That’s a rate of about 9%, less than half the US corporate rate of 21%, but far higher than the corresponding rate of 1.2% that Amazon reported for 2019 or the negative rates of 2017 and 2018.
The reason Amazon pays less than 21% is due in part to legislative decisions. Amazon reported $ 639 million in tax credits that companies can receive for preferred activities such as research or investments in renewable energy. It also received $ 372 million from an interruption related to overseas sales from the United States and $ 1.1 billion from treatment of stock-based compensation for its employees.
“Our US federal taxes reflect our continued investments, how we compensate our employees and the current US tax laws,” said the online retailer and the cloud computing company on Wednesday in a blog post. The company has not taken a position on Mr. Biden’s plans.
Amazon’s low tax expense in previous years, as well as similar numbers from other companies, helped spark democratic proposals for minimum taxes that would affect them.
“Half a loaf is better than none,” said Matt Gardner, a senior fellow at the left-wing Department of Taxation and Policy, of Amazon’s higher tax costs for 2020. However, he said, “We may still be in a place where That current tax system at Amazon does not really make sense in the long term. “
During the campaign, Mr Biden quoted Amazon as calling for a minimum 15% tax for large companies that would be applied to their financial statements. This is in addition to its proposed corporate income tax rate of 28% and higher taxes on foreign income of US companies.
Democrats often cite Amazon in their calls for corporate tax increases.
patrick t. Fallon / Agence France-Presse / Getty Images
Under Mr. Biden’s plan, companies with profits over $ 100 million would have to increase their tax rates to 15% after accounting for foreign tax payments and previous operating losses. The campaign predicted that the minimum tax would raise $ 400 billion in a decade, though independent estimates were lower. The outcome depends on how any law is written and how it interacts with other policy changes.
For 2019, according to Mr. Sullivan’s estimates, Amazon would have paid additional taxes of $ 1.3 billion under the Biden minimum tax. For 2020, it would have owed between $ 1.6 billion and $ 2.1 billion based on the minimum tax, depending on whether Congress raised the corporate tax rate to the 28% proposed by Mr Biden or kept it at 21%.
Among the companies that could have owed more than $ 1 billion a year on average under the minimum tax rate included AT&T. Inc.
and Berkshire Hathaway Inc.,
according to Mr. Sullivan.
Critics warn that a minimum tax could undercut tax incentives for capital investments, renewable energy and low-income housing. And they say that based on the revenue from the financial statements, the tax transfers power from Congress to the accounting authorities, who determine how corporate finances are reported.
If lawmakers have concerns about certain tax breaks, they should change them instead, said Steve Rosenthal, a senior fellow at the Tax Policy Center in Washington.
“There is a lot of complexity and administrative burden to creating a minimum tax without, in my opinion, producing any political benefit,” he said.
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Congress, which is initially focused on a coronavirus law, is unlikely to hike corporate taxes anytime soon and reserve tax hikes for later tax laws.
But Mr Biden will likely detail his plans later this year, and the Treasury Department has hired several tax law professors who have argued for years that U.S. corporations are paying too little. It would be your job to translate these campaign ideas into politics.
Alexandra LaManna, a spokeswoman for the Treasury Department, declined to comment on the development of the minimum tax plan.
There is no perfect way to measure a company’s tax rates. In part, this is because organizations don’t need to publicly report enough details for full analysis. This is in part because the definitions of income and other details of financial statements are different from those used for taxes.
For example, a company that resolved a 2015 tax dispute in 2020 will capture any change in its expected payments in 2020 so it could conflict with 2020 tax costs in its financial statements. Large capital investments typically result in significant upfront tax deductions, while accounting costs are spread out over the life of an asset.
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