Despite becoming the second US company to reach a value of $1 trillion last year, Amazon will not pay any federal income tax for the second year in a row.
A federal income tax is a tax levied by the United States Internal Revenue Service (IRS) on the annual earnings of all individuals and corporations based in the country. As noted by the Institute on Taxation and Economic Policy, Amazon is managing to avoid paying these taxes using a variety of tax credits and tax exemptions that are legal and built into the US federal tax code.
Jeff Bezos’ company nearly doubled its profits to $11.2 billion in 2018 from $5.6 billion the previous year. Despite this, Amazon reported a federal income tax rebate of $129 million, meaning the company didn’t have to pay towards the statutory 21 per-cent income tax rate on its US income. While it may sound immoral and an unfair advantage on competitors, the practice is completely legal.
Some of the biggest criticism to Amazon’s practice has come from President Donald Trump. But he actually reduced the corporate tax rate in December 2017, making it even easier for some of the biggest tech companies to get away with paying less, Business Insider reports. The corporate tax rate was at 35 per cent, before being reduced down to 21 per cent.
This isn’t the first time this year Amazon has come under scrutiny due to controversies surrounding tax. When they announced they were planning on opening a second headquarters in the US, they had companies competing in a bidding process trying to get Amazon to move there.
According to Business Insider, New Jersey offered $7 billion in tax breaks to Amazon if they chose to build their new campus somewhere near the city of Newark. They have also had millions of dollars in tax breaks to build warehouses in certain states as well as data centers around the country.
Of course Amazon is not the only company that operates in this way paying as little tax as possible. In September 2018, Apple was forced to pay the Irish government €14.3bn (£12.7bn), due to illegal tax breaks, the BBC reports. Apple located their European operations in Ireland because of its low tax rate. That money given back to the Irish government was the same amount as the country’s entire health budget for the year.
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