Earlier this week, Amazon was criticized for unfairly shifting its tax burden. Critics claim that the company has evaded nearly $278 billion in corporate taxes during the last decade alone. This misleading figure glosses over a bigger truth about how large corporations pay their taxes. The cohort commonly referred to as the “Silicon Six,” including Amazon, Netflix, and Meta, lies at the heart of this worry. The Fair Tax Foundation (FTF) has highlighted Amazon’s significant tax avoidance as a critical issue, noting how its corporate structure may be designed to minimize tax liabilities.
That’s why the allegations against Amazon are so egregious. According to another damaging report, the company booked 80 percent of its UK revenues in Luxembourg, a low-tax black hole with a razzle-dazzle corporate tax rate. This practice is a fundamental undermining of the legitimacy of many profit shifting strategies used by multinationals. Amazon to deliberately book all its UK retail revenues, expenses, profits and taxes within the UK. They subsequently paid these taxes directly to HM Revenue and Customs, or HMRC.
By this measure, Amazon’s corporate tax rate is 19.6%. This rate is still higher than its peers, Netflix at 15.4% and Meta at 18.4%, but nonetheless paints part of the picture of a growing trend of decreasing effective tax rates among massive technology firms. Over the last 10 years, Amazon created about $11 trillion in revenue and $2.5 trillion in profits. Its average effective corporate income tax rate was a mere 18.8%. This rate is significantly lower than the statutory rate that US companies with similar profits would have to pay.
Paul Monaghan, chief executive of the Fair Tax Foundation, commented on the findings:
“Our analysis would indicate that tax avoidance continues to be hardwired into corporate structures. The Silicon Six’s corporate income tax contributions are, in percentage terms, way below what sectors such as banking and energy are paying in many parts of the world.”
Perhaps most notably, the FTF’s report sheds light on how deeply Amazon has slashed its tax payments to the corporate coffers. This drop is in stark contrast to the very high hopes placed on the company’s earnings. These circumstances have led to a resurgence of calls for corporate tax reform and the ethics of such practices.
As Amazon recently noted in their defense of their tax strategy, all of this is completely legal under current international and local tax laws. An Amazon spokesperson remarked:
“Governments write the tax laws and Amazon is doing the very thing these laws encourage companies to do – paying all taxes due while also investing billions in creating jobs and infrastructure.”
It has repeatedly highlighted its record investments in the US and Europe. They half-heartedly argue that these investments, combined with low margins, result in a cash tax rate as a share of revenue that is at or below zero.
Despite these defenses, critics argue that the existing tax framework allows large corporations to exploit loopholes, leading to significant discrepancies in their contributions compared to other sectors. The persistent pressure about Amazon’s tax avoidance might have an effect on any future federal legislative campaigns to improve our corporate tax code.