Companies Like Amazon Might Finally Be Forced to Pony Up Taxes — What This Could Mean For You
As the pandemic has widened the wealth gap and increased the poverty level for millions of Americans, the pressure on billion-dollar companies evading their tax bills has been mounting.
Earlier this year, President Biden said Amazon was one of the 91 Fortune 500 companies that “use various loopholes where they pay not a single solitary penny in federal income tax,” speaking of the well-known practice by large corporations that shuffles their profits to off-shore tax havens and helps them avoid paying any tax in their home base. In contrast, a middle-class American family making under $65,000 a year pays 20% a year in federal income tax — and for them, there’s no Cayman Island or Irish bank to punt off their tax bill to.
Over the weekend, the finance ministers of the G7 met and, in a historic decision, finally agreed to push for a 15% global minimum tax rate on corporations. Politicians around the globe have been trying for decades to put legislation in place to avoid this, but the conflicts between corporate and political interests make the issue complicated. For example, the Seattle Times reports that a country like Ireland, with a headline tax rate of 12.5%, would stand to lose around $2.4 billion in tax revenue, whereas France, with a headline rate of 26.5%, would gain around $6 billion if the tax agreement were to go through. As such, Ireland has been vocal in its opposition to the new tax law and has stated that keeping low corporate tax rates is one of the only areas it can compete globally. The Seattle Times adds that U2 singer and Irish native Bono even once said that low tax rates for companies gave Ireland “the only prosperity it’s ever known.”
The argument is that in comparison to smaller economies like Ireland, countries like France hardly need the extra revenue, and most international tax havens are in countries that stand to largely benefit — and survive — from their continued presence. The Cayman Islands in the Caribbean is another such country that largely benefits from agreeable tax policy. A virtually zero-rate tax policy brings thousands of wealthy corporations to its shores that ordinarily might not have visited the tiny island nation in such droves.
In the United States for 2018, Amazon posted income of more than $11 billion but paid zero in federal taxes. CNBC reports that in fact, thanks to tax credits and deductions, Amazon actually received a federal tax refund of $129 million. Amazon’s $162 million 2018 tax bill was its first in two years, and it accounted for only 1% of the company’s profits.
In Europe, Amazon’s tax bill was once again zero despite a record sales income of 44 billion euros, The Guardian reports. This was in addition to the 56 million euro tax credits it has available in Europe to offset any future tax bills should it turn a profit.
While it may seem far off that enough international cooperation would come to fruition to lock the agreement in place, more progress was made over the weekend than ever before. The strife of the pandemic and recent memory still lingering from the most recent recession are perhaps enough to finally push for large companies paying what normal Americans have paid all their lives.
So what does this mean for you?
Most of these large companies, like Amazon, Facebook and Google, employ thousands of Americans, and their operations extend throughout the country. Should these companies actually start ponying up their fair share of the tax bill, it could mean they will be forced to operate elsewhere. Although these corporations currently find respite in countries that neighbor their operations — the Caribbean for the U.S. and Luxembourg and Ireland for the EU — new tax laws could change that. It is unclear whether or not a new global tax law would extend to places like Asia, India and the Philippines, to which many American companies already outsource operations for lower costs. Large tech companies could start offshoring more jobs to increase profit margins, which could potentially mean domestic job losses.
If taxes increase enough, it also might eventually siphon down to prices. Amazon already charges fees for delivery, and these could potentially see an increase if there was a significant change to operations. Facebook, Google and other companies that currently offer free services could either charge fees or collect even more data on their customers to sell to advertisers as a result of increased costs.
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