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Corporate income tax is paid on net profits, not on sales revenue (if it were otherwise, it would just ban low-margin businesses, which would be harmful to soci
by brainwad 5y ago
Corporate income tax is paid on net profits, not on sales revenue (if it were otherwise, it would just ban low-margin businesses, which would be harmful to society). Amazon not owing corporate income tax isn't at all surprising. In most years that Amazon has existed, it didn't make a net profit at all, worldwide. It's still quite a low-margin business and I can easily imagine that the Europe business is still loss-making.
- varjag 5y agoI miss the days when unprofitable companies went bankrupt.
- mrweasel 5y agoAmazon isn't unprofitable, they just reinvest everything back into developing the company. Politicians just failed to take that scenario into account when designing the tax laws. I do however agree with you. There is a ton of companies that only survive because investors keep pumping money into them. If you can't turn a profit after ten years, then maybe your company shouldn't exist.
- nspattak 5y agoNo they do not necassarily reinvest everything back to the company, they just funnel the money to tax heavens: https://www.youtube.com/watch?v=d4o13isDdfY https://www.youtube.com/watch?v=d4o13isDdfY
- fyzics 5y agoWhy is reinvesting profits a bad thing. Reinvesting 1Billion into the company is more beneficial to society than paying tax on that 1 billion. Creating thousands of new jobs is much better than however the government would spend the 200M they collect in taxes.
- varjag 5y agoIf it didn't make net profit as GP suggests, it's unprofitable. If it did but shuffled the money via subsidiaries to present that it didn't, it's called tax evasion indeed.
- brainwad 5y agoThey do, when they run out of runway. But a well-calculated reinvestment strategy, like Amazon's, can have a very low burn rate and so a very long runway.
- varjag 5y agoAmazon operates for soon 3 decades on global scale, without making a profit as you say. Can't possibly imagine where that long a runway is coming from; maybe the crux here rather is some creative accounting.
- brainwad 5y agoThey made a profit globally for the last two years. But for many years they were very careful to expand neither so fast they went bankrupt, nor so slow they would waste investor money on taxes.
- lotsofpulp 5y agoIt comes from successfully expanding into more and more businesses and delivering the numbers investors desire (probably including the defined pension funds of the very countries being talked about in this thread).
- varjag 5y agoI like the phrasing, but perhaps if Amazon subsidiaries paid their due tax, they'd be a less attractive investment vehicle and would have had less capital to successfully expand.
- brainwad 5y agoThey _do_ pay their due tax. It's not tax evasion to reinvest in new business areas. Corporate income tax is levied on net profit precisely to encourage economic development in a country, instead of economic extraction.
- wiz21c 5y agoI get it but bezos became a billionaire. Does it mean that his salary is considered a loss too, and so are all the salaries of the employees of Amazon too ?
- wreath 5y agoHe became a billionaire not because his salary is now $1B. His net worth is
- dimman 5y agoNot a loss but a cost/expense. A loss is, to put it simple, when money in - money out < 0. Without having looked it up, I would imagine that most of his wealth is tied to amazon stock.
- jedberg 5y agoHe's a billionaire because the US is printing money and pumping it into the stock market, and a ton of it goes to him personally. His salary is only $81,000 a year (and yes, it's tax deductible).
- string 5y agoSalaries are operating expenses, so if a company makes £1,000 revenue and pays £1,000 in salaries to its staff, it makes £0 profit.
- brainwad 5y agoBezos's billions are from capital appreciation of his Amazon stocks. They are pending taxation, because the US (and pretty much all other countries) don't tax unrealised capital gains, because they are not stable - during a crash Bezos' net worth would drop by tens of billions of dollars, and the government wouldn't want to have to refund the capital gains tax it took from him - and because they are hard to measure for illiquid assets - if Amazon were still a private company, it would be difficult to value. So they wait until a definitive final sale, which provides a convenient line in the sand for both problems. There is, however, a loophole in the US, where capital gains are ignored if you hold your assets until your death - which incentivises people to never sell.
- 5y ago
- ksaxena 5y agoI would also like to ask, on the 44 Bn sales, how much VAT or other indirect taxes were collected by the government?
- brainwad 5y agoThe EU has a minimum VAT rate of 15% and an average of like 20%, so a huge amount.
- cowgoesmoo 5y agoVAT and employee income tax are always conveniently ignored in these articles