Amazon not paying taxes 2018
For the third most valuable company in the world, it’s amazing that Amazon has not had to pay any taxes to the U.S government since 2017. It has received hundreds of millions of tax credit but experts are not pointing fingers as no illegality is involved.
- Amazon not paying taxes in the US
- How Amazon qualify for tax redemption in 2018
- How much taxes amazon paid in state tax & international tax
How Does Amazon Qualify?
Being such a valuable company, one would wonder how Amazon is managing not to pay taxes? As per policy of the U.S Congress, the U.S Tax Code enables companies going into losses to reduce their taxable income. With Amazon (AMZN)’s billions of dollars of losses in the last 20 years, has enabled it to qualify for this rule.
- The company had a loss of $3 billion over its initial 8 years, went on between profits and losses since 2003 and had its most recent losses in 2014 of $241 million.
- Its revenues have been increasing stealthily and a high portion of it comes from sales outside the U.S where it has paid little or no tax.
- Also, investments in smart equipment – computers and robots have offset its earnings further thus reducing taxable income. The corporate tax bill passed in 2017 (2017 Tax Cuts and Jobs Act) helped companies like Amazon receive an accelerated tax credit for equipment purchased.
- It also received Research & Development (R&D) tax credits.
- In 2017, Amazon received a credit of $137 million tax credit and it paid a net tax of $129 million in 2018.
The company disclosed in its recent financial statements that it had $1.4 billion in federal tax credits to offset future taxes.
Following the Rules
However, Amazon has paid its share of $1.1 billion taxes in 2016 so it cannot be called out for not paying its dues. In contrast companies like GM have paid little tax since its bankruptcy in 2009, despite having being turned around and now posting gains. GM has the advantage of not paying taxes for a number of years ahead.
Amazon has still paid taxes in form of non-federal taxes as well. It paid $533 million in state taxes and $1.3 billion in international taxes to other countries.
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The company should be subject to 21% tax rate on its U. S income. The company has explained this observation widely publicized by analysts and reports as follows – “The fine print of Amazon’s income tax disclosure shows that this achievement is partly due to various unspecified ‘tax credits’ as well as a tax break for executive stock options.”
It has smartly diverted the money saved thus by lesser or no taxes to grow its equipment, automation and service quality. It has grown manifolds and actually has no requirement for tax breaks.
The revelations have shocked the general public as well the same politicians who passed the bill in 2017. Trump administration failed to disclose the tax advantages such behemoths would receive in case of losses. However, for political class per say is wary of corporate taking advantages of such laws in the future.