Submitted by SafeHaven.com
President Trump has never hidden his disdain for cyber-retailing giant Amazon Inc., accusing the company of unfair tax practices and antitrust violation. The president probably won’t be too amused by a new report that the company avoided paying any federal income tax in 2018 for the second year in a row despite posting billions of dollars in profits.
The purveyor of two-day delivery of just about everything posted a massive net income of $11.2 billion in fiscal 2018 after doubling it from the previous year’s tab of $5.6 billion. Yet, a report by the Institute on Taxation and Economic Policy (ITEP) shows that the company did not pay a single cent in income tax on both occasions—ironically in large part due to Trump’s tax bonanza of 2017.
Tax loopholes
Incredibly, the company’s latest corporate filing reveals that far from paying the statutory 21 percent income tax demanded under the new tax laws, it’s the federal government that ended up paying Amazon thanks to a slew of tax loopholes.
In 2017, Amazon collected $140 million in rebates for an effective tax rate of -2.5 percent with the company pocketing another $129 million last year for a tax rate of -1%. The fine print in Amazon’s tax disclosure says the company achieved this partly due to a tax break for executive stock options as well as various unspecified ‘‘tax credits.’’
ITEP, an organization that has studied tax-paying habits by corporations for nearly 40 years, places the blame on Congress for this scenario. Proponents of the new laws claimed that a lower tax rate would incentivize better corporate citizenship.
Yet, Congress failed to anticipate a potentially tricky situation after failing to broaden the tax base or close critical tax loopholes that allow companies to avoid paying federal tax on nearly half their profits. The Tax Act saw the statutory corporate tax rate lowered from 35 percent to just 21 percent with the Trump administration and its congressional allies also throwing in lavish new giveaways for good measure, including the immediate expensing of capital investments.
Numerous prognosticators scored the new law as being a potentially huge revenue loser that would end up giving away far more to big corporates like Amazon that it would take in loophole-closers. And, it appears they were spot on. Many companies now effectively pay zero or single-digit tax rates.
In fact, Amazon is not the only high-profile company that has mastered the art of corporate subterfuge. Last year, Netflix got away with it too despite posting a net profit of $858M, the largest in the history of the video-streaming company.
Tax controversies
Amazon is not exactly a stranger to tax controversies. Last year, the company engaged in an aggressive push for new relocation subsidies for its new HQ2 locations, in New York and Virginia as well as additional tax breaks for its Nashville operations. The latest developments though suggest that the company is likely to find it increasingly hard to muscle its way with local tax authorities. The company’s hubris-laced search for a second headquarter was a pageant-like affair that ended in embarrassment for the retail giant after New York leaders and politicians publicly balked at the massive tax giveaways the company was to receive in return for creating 25,000 jobs.
But so far, allies in Congress are yet to answer why nobody is willing to lay a glove on one of the world’s most valuable companies. Trump himself has criticized the company for its tax avoidance in the past yet seems oblivious to the fact that his generous tax package only appears to have exacerbated the problem. The year 2018 was the first full year of the new tax law, meaning we will get a better sense of just how much the floodgates have opened after most Fortune 500 companies have reported their fourth-quarter results about a month from now. Initial findings though suggest that Amazon and Netflix are unlikely to be the only ones.
via ZeroHedge News https://ift.tt/2E1je2a Tyler Durden