Tech companies donâ€™t pay their taxes.
Together, Amazon, Facebook, Google, Netflix, Apple, and Microsoft may have skipped out on more than $US100 ($146) billion in taxes they should have paid since 2010, according to a new report from the UK-based tax accreditation organisation Fair Tax Mark. Thatâ€™s enough to pay three million Americans the median per capita annual income, 14 per cent of U.S. annual spending on K-12 education, 500,000 US homes, a nearly two-million-foot stack of one dollar bills, 56 million square feet of Manhattan real estate, 50 billion cans of beans, nearly one billion years of Netflix… fill in as applies to you.
Generally, about half of what they were ostensibly obligated to pay under corporate tax rates came out of U.S. pockets in subsidies and tax breaks, not to mention the immense stockpiles of cash theyâ€™re hoarding in havens in Bermuda, Ireland, Luxembourg, and the Netherlands, to list a few of the locations cited by Fair Tax Mark.
â€œTheir accounts actually note vast unrepatriated income abroad and that they are now bringing these historical sums back post Trumpâ€™s Tax Cuts and Jobs Act 2017 at much-reduced rates,â€ Fair Tax Mark Chief Executive Paul Monaghan tells Gizmodo. Monaghan says that the companies donâ€™t share information about income, profit, and tax across various countries, which â€œthey should most definitely be disclosing.â€
Fair Tax Markâ€™s report points to Appleâ€™s long habit of shuffling its money around the world and forking it over only when regulators reign them in. In 2017, Apple avoided paying $US50 ($73) billion in taxes on untaxed cash stored abroad, bringing it home for Trumpâ€™s sweet one-time charge of $US38 ($56) billion.
Fair Tax Mark concentrates on â€œcash taxes paid,â€ the actual amount of taxes paid after deductions and refunds, versus tax provisions, the amount companies estimate paying in their public financial reports, including deferred taxes which may or may not be paid in future. Note that the corporate income tax rate was 35 per cent before the Trump administration cut it to 21 per cent in 2017.
Amazon paid $US3 ($4.96) billion in income taxes over the past decade, which amounts to 12.7 per cent of profit over that time.
Facebook paid 10.2 per cent of its profits since 2010, â€œat a time when the federal headline rate of tax in the United States was 35 per cent for seven of the eight years under examination.â€
Google has claimed that its â€œoverall global tax rate has been over 23 per cent for the past 10 years, in line with the 23.7 per cent average statutory rate across the member countries of the OECD.â€ Fair Tax Mark finds that it has actually given 15.8 per cent of its profits in cash tax paid.
Netflix also paid 15.8 per cent on its profits, albeit it operates on very thin profit margins.
Apple, which, they note, â€œpresents itself as â€˜the worldâ€™s largest taxpayerâ€ makes good on its word with a total payment of $US93.8 ($137) billion in income taxes this decade. But the percentage of profits is still a measly 17.1 per cent.
Microsoft â€œhas the least aggressive approach to tax avoidance of the Six,â€ they write, paying $US46.9 ($69) billion in income taxes, though that represents 16.8 per cent of its profit.
Google, for one, does not interpret tax responsibilities this way. A spokesperson tells Gizmodo that Fair Tax Mark â€œignores the reality of todayâ€™s complicated international tax system, and distorts the facts documented in our regulatory filings.â€ They continue: â€œLike other multinational companies, we pay the vast majority – more than 80 per cent – of our corporate income tax in our home country. As we have said before, we strongly support the OECDâ€™s work to end the current uncertainty and develop new tax principles.â€ When pressed to further address the relevant claims in the report, Google declined to comment.
That statement skirts around Fair Tax Markâ€™s point of contention, which is with Googleâ€™s statement about paying 23 per cent in global, not U.S., taxes. â€œGoogleâ€™s statement bears out our contention that the majority of the tax gap is probably playing out outside of the U.S.,â€ Monaghan tells Gizmodo. â€œIn recent years [less than] 50 per cent of Googleâ€™s reported profits are â€˜foreignâ€™, but obviously not their taxes paid!â€
For argumentâ€™s sake, Iâ€™ll focus on Amazon, which famously paid zero dollars in federal income tax in the U.S. in 2017 and 2018, mainly due to tax breaks. Some economists (and politicians)Â argue that these are essential for economic growth; others stress that this is totally legal. Bernie Sanders calls this absurd.
Amazon argued in a statement to Gizmodo that itâ€™s unfair for Fair Tax Mark to lump them in with â€œtechnology companiesâ€ with higher profit margins, as though Amazon isnâ€™t a tech company. â€œAmazon is primarily a retailer where profit margins are low,â€ a spokesperson wrote, â€œso comparisons to technology companies with operating profit margins of closer to 50 per cent is not rational.â€ (By â€œwhere,â€ the spokesperson said Amazon is referring to the â€œwider retail environment,â€ not location.) Amazon very much is a tech company, and Monaghan would like to note that Amazon Web Services accounts for over half of their profits. (It also offloads much of the overhead cost that traditional retailers must endure to third-party sellers.) Plus, Monaghan writes, Amazonâ€™s claim that its fellows operate with 50 per cent profit margins is false: â€œthe margins of the others over the decade are Google (27 per cent), Apple (30 per cent), Microsoft (31 per cent), Netflix (4.5 per cent), Facebook (44 per cent).â€
Itâ€™s true that Amazonâ€™s profit margin is low; as Bloomberg explains, it keeps it that way by investing in new warehouses it can write off and paying employees in stocks, on which it can claim deductions. It also leverages a research and development credit and tax breaks on previous losses, at which point, Bloomberg writes, â€œits U.S. corporate tax liability can be whittled down to zero.â€ Those losses, Fair Tax Mark notes, add up to a $US9.3 ($14) billion exchequer which Amazon can put toward future taxes.
The Amazon spokesperson also stated that â€œAmazon represents about 1 per cent of global retail with larger competitors everywhere we operate, and had a 24 per cent effective tax rate on profits from 2010-2018 â€“ neither â€˜dominantâ€™ nor â€˜untaxedâ€™.â€
Monaghan would put the effective tax rate at 21.4 per cent, but â€œ[l]etâ€™s say Amazon is right,â€ he argues: that figure is still intentionally misleading because it applies to funds Amazon reports earmarking for taxes, not what it actually pays. â€œIn terms of money actually paid over â€“ the â€˜cash taxes paidâ€™ â€“ the number is 12.7 per cent over the last decade. They do not dispute this number, but rather are misdirecting people to a larger, vaguer and different figure.â€ Monaghan says that Fair Tax Mark sent all of its figures to the six companies, none of which were disputed.
That still doesnâ€™t address the issue of what companies should have paid. Sure, $US3 ($4.38) billion in city and state subsidies for Amazonâ€™s proposed New York headquarters could have been the â€œastounding return on investmentâ€ Bill de Blasio anticipated. But theyâ€™re playing with U.S. money, and so far, Googleâ€™s New York campus hasnâ€™t seemed to do much to alleviate New Yorkâ€™s human rights emergency. People are sleeping on the pavement, rents keep rising, and itâ€™s freezing out here. Jeff Bezos could chip in a few billion now and then, with a hundred to spare.
Gizmodo has reached out to Netflix, Facebook, Apple, and Microsoft and will update the post if we hear back.