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Taxing profit is essentially a tax break for spending. Amazon.com in the US reinvests almost everything it makes back into Amazon from what I understand (please

by mcny 9y ago

Taxing profit is essentially a tax break for spending. Amazon.com in the US reinvests almost everything it makes back into Amazon from what I understand (please correct me if I'm wrong). Is it ok for them to pay no taxes? Let's say someone buys $1B worth of junk, has expenses like salary etc of $1B, does something with it and sells products and services worth $2.2B. Do they pay taxes on $2.2B or on $0.2B? I think we can fix some kinds of tax dodging by taxing the $2.2B. If I'm on a low margin business, that's not the government's problem to pick winners and losers, right?

sjwright 9y ago
The $1B of salaries are being taxed as income and the $2.2B of sales most likely hits a sales tax. (Or the $1.2B difference, if it’s a VAT/GST style tax.) I personally don’t see the point of corporate tax, other than to make other taxes seem smaller than they’d otherwise have to be. Profits are not in and of themselves useful to people; they have to be converted to income somehow.
- neoeldex 9y ago
  The problem with taxing income is that it taxes the lower/middle class heavier than upperclass. Usually the upperclass has ways of diverting their income into other means. Taxing profits is the current approach. There's been talk about taxing revenue for companies. Which is measurable on a nation's level
  - sjwright 9y ago
    Then identify the ways wealthy people can divert income (e.g. Australia's fringe benefits tax) and force them to report it as income.
themihai 9y ago
I think you are wrong: - I'm sure Amazon did its best to pay the lowest possible tax. In EU they are taxed on profit so if they woundn't make a profit(i.e. they would reinvest) they would not be taxed. - Amazon Europe is not Amazon US. They don't want to trade as Amazon US in Europe because they would pay even more tax(in the US). - It's not enough that they are registered in a country with the lowest possible tax, they get a special deal there too to pay less tax than the other Luxembourg based companies/business. This is what EU is sueing them for...they've got state aid(as tax break) from Luxembourg.
- vixen99 9y ago
  its best
empath75 9y ago
It’s a tax break for investment
zaqokm321 9y ago
> Let's say someone buys $1B worth of junk, has expenses like salary etc of $1B, does something with it and sells products and services worth $2.2B. Do they pay taxes on $2.2B or on $0.2B? I think we can fix some kinds of tax dodging by taxing the $2.2B. That does not quite add up .... let's say the tax rate is 20%. The tax on $0.2B is $40m, the tax on $2.2B would be $440m, which would mean the company is making a $220m loss. But not only that, say the salaries are $1B then the government would $200m in double taxation, maybe socialise the loss and take $200 million from the workers salaries. Then not only that, lets say the $1B of junk is made in the same country as the above company, the government would make another $200m by taxing them. That is a little regressive.
ams6110 9y ago
Amazon is paying payroll taxes on all its salaries, sales taxes on everything it buys, property taxes on its physical locations, plus employing thousands of people. They are not "dodging" any responsibilities.
gpresot 9y ago
Companies are generally taxed on income (so in your example, 20% on $0.2B). This is the "corporate tax". In addition other taxes may be applied (VAT, labor taxes etc), but this is another matter. Companies try to reduce the amount paid in corporate tax (on income) in many ways. Some legal (e.g. creating a separate company that owns the IP, like brands and patents, which then charges a fee for their use to other part of the corporation; this way they can shift profit from a high rate country (France, US) to a lower rate country (Ireland). This seems to be the case here, plus the fact that Luxembourg offered a deal on this tax rate. Another legal way to reduce taxes is by investing your income: this generates depreciation which reduces your profit for the following years (but not your cash at year end, particularly if you finance part of the investment through debt). Illegal ways to reduce your profits: fake invoices, etc. The EU is now discussing ways to tax some companies (in particular tech companies with substantial cost bases abroad (e.g servers, ip, brands could be owned by a separate company in Bermuda which charges sister companies in UK, France, US, thus leaving potentially zero profit to be taxed in those countries) based on revenues (e.g. you have revenues of $1B in UK, you pay 3% tax on that (equivalent to charging 20% tax rate on $150 Million of profit. This would make the separate IP company useless.
- taysic 9y ago
  Taxing based on revenue sounds very detrimental for companies with low margins - say your profit is only 1% of your revenue. Then you would go out of business by this tax. Also seems very harmful to yet unprofitable startups.
taysic 9y ago
> If I'm on a low margin business, that's not the government's problem to pick winners and losers, right? So you would penalize companies that are offering a useful service and making less profits over those that are offering a useful service and making more profits. The former may be reducing cost greatly to the consumer but may not be able to stay in business due to this type of tax. Thus, it would artificially prop up the cost of goods to the consumer.

by mcny 9y ago

sjwright 9y ago

The $1B of salaries are being taxed as income and the $2.2B of sales most likely hits a sales tax. (Or the $1.2B difference, if it’s a VAT/GST style tax.) I personally don’t see the point of corporate tax, other than to make other taxes seem smaller than they’d otherwise have to be. Profits are not in and of themselves useful to people; they have to be converted to income somehow.

neoeldex 9y ago
The problem with taxing income is that it taxes the lower/middle class heavier than upperclass. Usually the upperclass has ways of diverting their income into other means. Taxing profits is the current approach. There's been talk about taxing revenue for companies. Which is measurable on a nation's level
- sjwright 9y ago
  Then identify the ways wealthy people can divert income (e.g. Australia's fringe benefits tax) and force them to report it as income.

themihai 9y ago

I think you are wrong: - I'm sure Amazon did its best to pay the lowest possible tax. In EU they are taxed on profit so if they woundn't make a profit(i.e. they would reinvest) they would not be taxed. - Amazon Europe is not Amazon US. They don't want to trade as Amazon US in Europe because they would pay even more tax(in the US). - It's not enough that they are registered in a country with the lowest possible tax, they get a special deal there too to pay less tax than the other Luxembourg based companies/business. This is what EU is sueing them for...they've got state aid(as tax break) from Luxembourg.

vixen99 9y ago
its best

empath75 9y ago

It’s a tax break for investment

zaqokm321 9y ago

> Let's say someone buys $1B worth of junk, has expenses like salary etc of $1B, does something with it and sells products and services worth $2.2B. Do they pay taxes on $2.2B or on $0.2B? I think we can fix some kinds of tax dodging by taxing the $2.2B. That does not quite add up .... let's say the tax rate is 20%. The tax on $0.2B is $40m, the tax on $2.2B would be $440m, which would mean the company is making a $220m loss. But not only that, say the salaries are $1B then the government would $200m in double taxation, maybe socialise the loss and take $200 million from the workers salaries. Then not only that, lets say the $1B of junk is made in the same country as the above company, the government would make another $200m by taxing them. That is a little regressive.

ams6110 9y ago

Amazon is paying payroll taxes on all its salaries, sales taxes on everything it buys, property taxes on its physical locations, plus employing thousands of people. They are not "dodging" any responsibilities.

gpresot 9y ago

Companies are generally taxed on income (so in your example, 20% on $0.2B). This is the "corporate tax". In addition other taxes may be applied (VAT, labor taxes etc), but this is another matter. Companies try to reduce the amount paid in corporate tax (on income) in many ways. Some legal (e.g. creating a separate company that owns the IP, like brands and patents, which then charges a fee for their use to other part of the corporation; this way they can shift profit from a high rate country (France, US) to a lower rate country (Ireland). This seems to be the case here, plus the fact that Luxembourg offered a deal on this tax rate. Another legal way to reduce taxes is by investing your income: this generates depreciation which reduces your profit for the following years (but not your cash at year end, particularly if you finance part of the investment through debt). Illegal ways to reduce your profits: fake invoices, etc. The EU is now discussing ways to tax some companies (in particular tech companies with substantial cost bases abroad (e.g servers, ip, brands could be owned by a separate company in Bermuda which charges sister companies in UK, France, US, thus leaving potentially zero profit to be taxed in those countries) based on revenues (e.g. you have revenues of $1B in UK, you pay 3% tax on that (equivalent to charging 20% tax rate on $150 Million of profit. This would make the separate IP company useless.

taysic 9y ago
Taxing based on revenue sounds very detrimental for companies with low margins - say your profit is only 1% of your revenue. Then you would go out of business by this tax. Also seems very harmful to yet unprofitable startups.

taysic 9y ago

> If I'm on a low margin business, that's not the government's problem to pick winners and losers, right? So you would penalize companies that are offering a useful service and making less profits over those that are offering a useful service and making more profits. The former may be reducing cost greatly to the consumer but may not be able to stay in business due to this type of tax. Thus, it would artificially prop up the cost of goods to the consumer.