Lengthy-term tax goal Amazon now leads the reform price

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Long-term tax target Amazon now leads the reform fee

Jeff Bezos, founder and CEO of Amazon, said he was backing higher corporate taxes to fund infrastructure improvements

Amazon has long been a lightning rod for critics of corporate tax avoidance and is now looking to lead the way in reforms.

Jeff Bezos, CEO of Amazon, this week approved a higher corporation tax to fund infrastructure as part of a “balanced solution that will maintain or improve US competitiveness”.

Amazon’s move comes after years of criticism from activists claiming they pay little or no corporate taxes.

According to the Institute for Taxes and Economic Policy, an advocacy group, last year Amazon had an effective income tax rate of 9.4 percent on profits of $ 20 billion after two years of no tax.

The low tax rate is partly explained by the Trump-backed 2017 reform that lowered corporate taxes. Amazon also benefited from “write-offs interruptions” in its investments and stock options, according to the institute.

President Joe Biden, who is proposing a $ 2 trillion infrastructure program funded in part by increasing the corporate tax rate from 21 percent to 28 percent, last month cited Amazon as an example of corporate tax avoidance.

Biden was referring to a 2019 study that found that many of the “largest companies in the world, including Amazon … don’t pay a single penny in federal income tax,” the president said.

Amazon has defended its policies and has at times had heated debates with political leaders. His investments would have offset taxes, as stipulated by tax legislation.

“We pay every penny we owe. Congress drafted tax laws to encourage companies to reinvest in the American economy,” tweeted Amazon in response to a 2019 candidate Biden comment.

Amazon found that its tax provision from last year – the closest approximation of federal taxes paid – was $ 1.7 billion and that billions more were paid in wage taxes, duties, and state and local taxes.

US President Joe Biden speaks with Vice President Kamala Harris about Eisenhower executive infrastructure investments
President Joe Biden speaks with Vice President Kamala Harris on April 7 about infrastructure investments in the Eisenhower Executive Office Building on the White House campus

“Aggressive Tax Planning”

Daniel Shaviro, a law professor and tax specialist at New York University, said Amazon and other firms often use “aggressive tax planning” and can sometimes outmaneuver authorities, but most of the time they only use what the law allows.

“You can blame the political system,” Shaviro said.

The Amazon news comes amid a debate over harmonizing international tax rates for multinational corporations to limit profit shifting and with increased scrutiny of large companies using loopholes to lower their taxes.

ITEP said at least 55 profitable large U.S. firms paid no federal income taxes in 2020, including food conglomerate Archer Daniels Midland, delivery giant FedEx, and sportswear maker Nike.

“Avoiding corporate taxes hurts ordinary Americans by reducing resources for health care, road repairs, and other essentials,” said a recent blog post by Amy Hanauer, ITEP executive director.

Lilian Faulhaber, a professor of tax law at Georgetown University, said tax law is under constant pressure as companies use incentives to stimulate growth and sometimes go beyond what was intended.

Given the tax changes being made in various US states and around the world, “I think the tide is starting to turn and that these companies may be more pressure than they have been in a while to pay more taxes,” she said .

Looking ahead?

A big reason for Amazon’s low tax rate was its massive investments in warehouses and other services that can be deducted from profits but may bring more revenue in the future, Shaviro said.

A big reason for Amazon's low tax rate was its massive investments in warehouses and other services that are deductible.  F.
A major reason for Amazon’s low tax rate, according to tax specialist Daniel Shaviro, was the massive investments in warehouses and other services that can be deducted from profits but may bring more revenue in the future

“A company that is expanding pays less taxes, but in theory they pay more when they stop expanding.”

Some companies could use one year’s losses as a write-off of profits the following year, Shaviro noted, or deduct stock options that create a tax liability for the executives they receive.

“The government can generate total revenue if Amazon withdraws the stock option and a US person pays it,” he said.

More questionable is the practice of shifting or transferring profits around the world, underscoring the need for better tax harmonization between countries, Shaviro said.

Win favor

Some analysts say Amazon’s support for a higher tax rate may not make much of a difference if the company continues to be able to deduct similar expenses.

The higher tax rate “may not matter,” said Steve Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center.

In addition, Rosenthal said Amazon could seek favor with the Biden government in international negotiations as some countries seek new taxes on digital platforms in the US and a global contract from the Organization for Economic Co-operation and Development is discussed.

“Amazon needs the support of the US government to fight to avoid double taxation,” said Rosenthal.

“Amazon may support Biden in the hope of staying on his good side in negotiations with the OECD on taxing digital companies.”

Despite rising profits, Amazon will not pay federal income tax for 2018, according to the report

© 2021 AFP

Quote: Long-term tax target Amazon now cites the reform fee (2021, April 8), which was accessed on April 8, 2021 from https://techxplore.com/news/2021-04-longtime-tax-amazon-reform.html

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