Silicon Six accused of “aggressive tax avoidance”
Tech companies have more than $50bn of unrealised net income
The Silicon Six leading US tech companies have been accused of “aggressive tax avoidance” – with Amazon the worse offender.
Amazon, Facebook, Google, Netflix, Apple and Microsoft have avoided $100bn (£75bn) of tax over the past decade, by shifting revenue to tax havens and delaying tax payments, according to a report by Fair Tax Mark.
It found the gap between the expected headline rates of tax and cash taxes paid was $155.3bn, while the gap between current tax provisions and cash taxes paid was $100.2bn.
According to the report, most of the shortfall comes from outside the US, as the foreign current tax charge was just 8.4 per cent of foreign profits over 2010-19.
Fair Tax Mark chief executive Paul Monaghan, said: “The international tide is turning on the acceptability of corporate tax avoidance. The idea of countering the profit-shifting of big tech multinationals via the introduction of digital sales taxes has taken root in many countries.”
Amazon has the poorest tax record, paying just $3.4bn in tax on its income this decade, against revenues of $960.5bn and profits of $26.8bn. This makes Amazon’s tax rate 12.7 per cent when the headline tax rate in the US was 35 per cent for seven of the eight years examined.
According to Fair Tax Mark, Amazon is growing its market domination on the back of revenues that are largely untaxed, enabling it to “unfairly undercut local businesses that take a more responsible approach”.
There is a “staggering variance” between the tax paid by the big six US tech firms, with Apple and Microsoft paying $93.8bn and $46.9bn, respectively. The difference is even more astounding in light of the fact that Amazon’s revenue exceeded Microsoft’s by almost $80bn.
Fair Tax Mark Amazon warns investors that the six company’s collective tax contingencies have increased from $8.9bn at the end of 2010, to $47bn in 2019 and have accrued $5.7bn in connected interest and penalties. They have more than $50bn of unrealised net income due to their “aggressive tax positions”.
“Investors need to look afresh at the future impact that this will have on company valuations and income flows,” said Monaghan. “Not least because the OECD [Organisation for Economic Co-operation and Development] is now leading multilateral efforts to address the tax challenges from digitalisation of the economy, and is looking to ensure that profitable multinationals pay tax wherever they have significant consumer-facing activities and generate their profits.”
FURTHER READING: Amazon share price forecast for 2020 and beyond