back to article Amazon triples profit to $11.2bn, pays ZERO DOLLARS in corp tax – instead we pay it $129m

Amazon's pre-tax profits more than tripled last year to an extraordinary $11.2bn but, for a second year running, the web giant has paid not a single cent in US federal taxes. Not only that but, according to the Institute on Taxation and Economic Policy (ITEP), the tech titan was actually paid $129m by US taxpayers thanks to an …

  1. Charles 9 Silver badge

    So what do you do to keep transnational corporations from just pulling up stakes and moving to friendlier countries that are bound to exist due to competition?

    1. Craig 2

      "So what do you do to keep transnational corporations from just pulling up stakes and moving to friendlier countries that are bound to exist due to competition?"

      Sales in that territory = taxed in that territory. It's the only way.

      1. Anonymous Coward
        Anonymous Coward

        Also known as VAT

        1. Grikath Silver badge

          Ummmm nope.. VAT, in all its incarnations, is a surplus tax on a transaction paid by the consumer, and passed on to the state by the company providing the goods/service/tat.

          It has nothing to do with profit, gross or net. It's the State skimming off their bit of cream from the pie.

          1. Rol Silver badge

            It is also a means of manipulating demand and stifling profiteering.

            As in, it is difficult for a company to push prices up if VAT has already tipped the price to the point consumers think twice. Something that could come into play once the UK is returned to full control of its VAT system.

            In all practicality, the UK will have a brief moment in time where it gets to do as it wishes with the VAT structure, and then that control will be challenged by affected organisations in court. Assuming that is, that we kowtow to our American overlords and agree to be sued for anything we do that impacts on their profits, in return for a trade deal.

            Add in bleached chicken, lists of ingredients no longer a requirement on foods and confectionery, GM ingredients no longer having to be specified in products, the dismantling of the NHS, and one would start to wonder, just who it was, who was meant to be getting back control?

            1. Anonymous Coward
              Anonymous Coward

              FTR "getting back control" refers to "of the peasants".

              The peasants themselves will have less control than ever.

              Whenever the overlords refer to us, they are referring to themselves, not the people. Yet the people fall for it everytime.

              When you realise that, everything the politicians talk about makes a lot more sense... :(

            2. Anonymous Coward
              Anonymous Coward

              >In all practicality, the UK will have a brief moment in time where it gets to do as it wishes with the VAT structure

              The UK only has control of it's internal regimen - there will be no (UK) VAT paid on sales into Europe (no more EC Sales/Reverse Charge Mechanism) in future but VAT will be paid on all consumer imports at least - businesses will offset against UK VAT due. It's not immediately clear how the HMRC will make up for the billions in VAT it stands to lose, but they have published advice:

              (if you think negotiation was a tad flakey - look away now)

              https://www.gov.uk/government/publications/vat-for-businesses-if-theres-no-brexit-deal/vat-for-businesses-if-theres-no-brexit-deal

            3. Doctor Syntax Silver badge

              "Add in bleached chicken"

              And the hormones and antibiotics in meat. Don;t forget those. Got to produce a whole new lot of ailments for the non-NHS to charge for.

          2. keith_w

            ALL taxes are paid by the end user. The name of the tax indicates WHEN the tax is paid.

            1. hellwig Silver badge

              Yep, when your local government complains that companies like Amazon don't collect sales tax (or didn't used to), what they are actually saying is they want YOUR money. That's not Amazon's money.

              Just like the electric car tax rebates the US was giving out, those were for THE COMPANY, not the buyer. But sometimes, the corporation is actually nice enough to pass that on to the customer (or not collect sales tax).

              But make no mistake, only the people pay taxes, not the corporations and certainly not the rich politicians making the decisions.

    2. Jemma Silver badge

      Quite simple really

      Abolish money.

      People seem to think that if we stop using money we won't be able to buy food or anything else because without money no one will do anything - we'll all suddenly stop doing anything at all like someone switched off the mains electricity.

      They all for some reason have a psychological disconnect where we'll abolish currency yet still need to buy *something* with currency - or that people who research cancer, for example, will suddenly stop because no money (even though in that situation money is not required nor relevant because it no longer exists or has value).

      People have it the wrong way around. They think money is the reason for existence - we produce, innovate, eat, live, die - do everything we do because money.

      We will still do all those things without money in the equation and we'll do it better because God alone knows the amount of stress and harm and distraction that is caused by worry over money.

      Amazon without money won't just disappear, neither will any other company or project - the need is still there its just the result will be less poisonous. As it stands we have the patent system (which is a joke anyway) - for which you need money to protect your ability to make money from your idea, or concept or whatever. It's used as often to bury ideas as it is to protect them.

      I could go on.

      Of course the retard ratio way is simple. Every company trading in a country pays 20% of profits every year or it ceases to trade. There is one law - 20% for every company. I know personally of one relatively small company that has told Amazon to fuck itself over a £300k per year contract and gone somewhere else - on the UK tax issue alone. 10000 companies do that and £3b just went south for the winter

      1. Doctor Syntax Silver badge

        Re: Quite simple really

        I was taught a long time ago that money is a means of exchange. The alternative is barter. Is that what you're suggesting? Otherwise if I feel hungry I have to knock off one of the lambs in the next field. The farmer won't mind, will he? After all they will literally have no value to him.

      2. Rol Silver badge

        Re: Quite simple really

        There are two ways to run this planet - and they are both focussed on how to ration what little we have to the multitude that will never be satisfied with just enough.

        Both systems are crap, and it's arguable which is the crappiest.

        In a time where unmetered and limitless power is available, coupled with a good citizen education, we might realise Gene Roddenberry's vision of the future, with both money and micro-managing governments being made obsolete.

        Until then, your only choices are to pay with your freedom or pay with your earned cash

      3. Filippo

        Re: Quite simple really

        I'm looking forward to reading about your wonderful alternate economic system that can keep a society of 7+ billion people somewhat functional, or at least mostly alive, without the use of money. By all means, whenever you're ready.

        1. Rol Silver badge

          Re: Quite simple really

          Every seen The Matrix?

        2. Anonymous Coward
          Anonymous Coward

          Re: Quite simple really

          @Filippo re: "I'm looking forward to reading about your wonderful alternate economic system"

          LOL believers in the current system thinks that continuous economic growth is sustainable.

          Well they're right. Until they're not.

          And the planet collapses societally and environmentally. That is currently expected around the end of this century (though there will be significant upheaval before then).

          1. Doctor Syntax Silver badge

            Re: Quite simple really

            "LOL believers in the current system thinks that continuous economic growth is sustainable."

            LOL believers who equate money - which is a tool to trade what you do for what you want - with continuous economic growth.

            Of course continuous economic growth isn't sustainable. But then neither is a society running on barter at anything above subsistence level.

    3. PatuTessa

      Make it attractive to pay tax

      Charles 9 has an excellent question. One must somehow make it a better idea to pay taxes than not. Naturally, appealing to ethics is unlikely to work. And removing police protection from Amazon warehouses - on the grounds that they haven't paid for such protection - seems likely to have consequences that may be even worse.

      One possibility is to have a deductible tax on transactions, like a sales tax. Such taxes would only be levied on organizations not paying income tax, and would be levied at a rate making it advantageous for Amazon et al to book their corporate profits where they earn them. The difficulty is to work out the details to be less unreasonable than present tax laws.

      1. Jemma Silver badge

        Re: Make it attractive to pay tax

        We have VAT, we pay VAT, Amazon gets out of paying VAT - oh look back to square bloody one.

        You were saying?

        1. Persona

          Re: Make it attractive to pay tax

          No, VAT is still payable. Amazon can avoid corporation tax, it can't escape VAT.

          1. Anonymous Coward
            Anonymous Coward

            Re: Make it attractive to pay tax

            VAT relies on middlemen (it doesn't actually tax at the ends, only the steps in between—where value is added to the product, thus Value Added Tax—that's how it uses the middlemen to keep the ends honest), but how does it work for a firm that's vertically integrated and can go straight from source to consumer?

            1. Anonymous Coward
              Anonymous Coward

              Re: Make it attractive to pay tax

              how does it work for a firm that's vertically integrated and can go straight from source to consumer?

              A fair question, but the answer is "exactly the same". In theory VAT is passed all through the chain, but in practice companies don't charge other companies VAT so long as the receiving company is properly VAT registered. What happens is that companies have to account on paper for VAT whenever they buy or sell goods to any person or different company not in the same VAT group, but in cash terms VAT only gets charged by the final retailer when selling to a consumer or non-VAT registered business, at 20% of the price.

              If the producer and distributor is the same entity as the retailer (eg a farmer) then it still works the same way, that retail buyers get charged 20%.

              1. Roland6 Silver badge

                Re: Make it attractive to pay tax

                >but in practice companies don't charge other companies VAT

                They do...

                Company 'A', if it wants to stay in business, will add it's markup to create the sale price that company 'B' pays; VAT will be due on that markup...

                Yes in pricing up work, VAT is excluded, on the basis that VAT will be added, at the rates prevailing at the time the invoice is raised. So HMRC get a slice of VAT from each member of the value-add chain.

                The only time this does not happen is when dealing with certain VAT exemptions, in which case Company 'B' will present Company 'A' with an exemption certificate, Company 'A' will include such exemptions in its VAT returns.

              2. Ptol

                Re: Make it attractive to pay tax

                VAT starts simple, but soon gets complex...

                All VAT Companies pay VAT on their purchases from VAT registered companies, and charge VAT on their sales. They then submit a VAT return detailing the total VAT collected, and total VAT paid. If they collected more VAT than they paid, then they must pass the extra to the tax man. If they paid out more than they collected then they get a VAT refund from the tax man.

                Then there are a few additional rules to be aware of...

                1. If the transaction is across EU member states, and you have the other companies VAT number, then VAT is not paid / charged.

                2. Some things are zero rated, some things are VAT exempt. If you sell something thats zero rated, then you get to claim back the VAT you spent on producing and selling that thing. If something is VAT exempt, then you still have to pay the VAT to your supplier, but cannot claim back the VAT.

                3. VAT flat rate schemes allow you to charge your customers VAT, but only pay part of that back to the Tax office. The assumption is that you have paid for some supplies, but under the flat rate scheme, you cannot claim back the VAT that you have paid for supplies.

                Then there are the penalties if you get things wrong, combined with the enforcement powers when they think you got things wrong...

                1. werdsmith Silver badge

                  Re: Make it attractive to pay tax

                  It's not Amazon that pays the VAT, it's the customers. In fact it's not the corporates that pay pax, it's the end customers. Because 99% of the population is ordinary people then 98% of revenue is from ordinary people. Therefore the tax is paid by all of us.

                  So when we use Amazon we get fairly competitive prices, great availability, rapid delivery and swift simple returns without question. All a good service, which we can use because we as customers benefit from Amazon's clever accounting and tax avoidance.

                  Anyone who is not comfortable with Amazon taking our money to fund space research in the US, should not use them.

      2. Rol Silver badge

        Re: Make it attractive to pay tax

        Our tax system was designed to make the proles pay for the upkeep of the place, while not disadvantaging the ruling elite.

        Asking the ruling elite to construct a tax system that has no loopholes, is like asking Fox Constructions Ltd to build a totally secure chicken coup.

    4. sanmigueelbeer Silver badge

      Major tax accounting firms make money finding and exploiting tax loopholes in every country. This is what they're paid for by large multinationals who don't want to pay the right amount of taxes. And these loopholes takes YEARS (even decades) to fix.

      And once a loophole gets fixed, the accountants find another means to exploit somewhere else.

      The solutions are fix the loopholes QUICKLY in months instead of years/decades & make sure there is cooperation from all countries.

      One final thing: No more tax exemptions, tax "credits" or "special tax agreements".

      SIDENOTE:

      Back in 2014, I was in Paris for holidays and me wife and I decided to take a guided tour which included pickup from our hotel. Anyone on our way back the tour guide cum driver asked what is going to be the biggest problem with the world. I responded with "big multinational corporation REFUSING to pay taxes". The tour guide turned around and gave me the what-crack-are-you-smoking look.

      Anyway, fast forward to 2018 and I'm reading ElReg's coverage of French citizens protesting about Apple's tax avoidance activities in the EU. Wierd, eh?

      1. Anonymous Coward
        Anonymous Coward

        Major tax accounting firms make money finding and exploiting tax loopholes in every country.

        The loopholes largely exist for two reasons. The first is the complexity of domestic commercial tax codes. The more complex, the more things to go wrong, the more words that were poorly chosen, the more special circumstances. The UK has a vast, sprawling tax code comprising many thousands of pages - no single person can possibly understand that. IIRC, Hong Kong and Singapore manage with a few hundred (and that's probably too much).

        The second is the enthusiastic signing of international agreements by idiot politicians, who don't think through, or more likely don't care about the consequences. That's how companies manage tax tourism and rampant international transfer pricing.

        And unfortunately, the way civil servants fix loopholes always increases complexity, creating new ones they hadn't though of, and putting further burdens on the businesses which don't engage in global scale tax avoidance.

      2. DiViDeD Silver badge

        Tax Accounting Firms

        Bear in mind that the accounting firms who 'discover' the loopholes in the tax system are the same accounting firms who put them in when they were wearing their 'Government Tax Advisor' hats.

    5. Ian Michael Gumby Silver badge
      Boffin

      @Charles 9

      The law?

      In the past companies could do this via an inverted merger. The US company 'merges' with a foreign shell company and moves HQ outside of the US.

      The US Government changed the laws making this unattractive.

      At the same time... there are other things that also make it unattractive.

      Right now, money earned outside the US and not repatriated is not taxed in the US. But that's a different story.

      1. Charles 9 Silver badge

        Re: @Charles 9

        "The US Government changed the laws making this unattractive.

        At the same time... there are other things that also make it unattractive."

        And now you see the countermove: change the government to make it friendlier to you, and that's ALWAYS an option in any "decent" country.

    6. JetSetJim Silver badge

      What do you do? Set up a transnational tax rate collected by a separate body (e.g something like the WTO) and then disbursed among countries by some (hopefully fair) arbitrary rules (e.g by percent of revenue in that country).

      Obvs it will never happen...

  2. Alistair Silver badge
    Windows

    I could just shrug.

    But then, my names not Galt.

    Publicly traded corporations do NOT by definition serve their customers. Their customers are wallets. Such corporations must serve their stockholders. And in cases like the fortune 1000 most of those stockholders are either other corporations or they are banks or they are investment firms. These entities are interested only in cash coming into their pockets, so they can pay *their* shareholders. Which are mostly corporate entities.... Taxes, they just get in the way. Thus spending a small crapton of money to own the politicians that write the tax laws to make the corporations more money is a good ROI.

    1. Anonymous Coward
      Anonymous Coward

      Re: I could just shrug.

      You don't need to own the politicians. You just employ clever people who understand international taxation better than the local authorities understand their own tax law.

      1. Charles 9 Silver badge

        Re: I could just shrug.

        At some point, it becomes a useful asset, especially when governments start complaining about your loophole abuse. The thing with capitalism is that everyone has their price; that includes governments.

    2. Doctor Syntax Silver badge

      Re: I could just shrug.

      "And in cases like the fortune 1000 most of those stockholders are either other corporations or they are banks or they are investment firms."

      Do you have pension investments? Life insurance? Any other sort of saving scheme? If so then very likely some of the money that went into those companies' shares is yours.

    3. Intractable Potsherd Silver badge

      Re: I could just shrug.

      "... Such corporations must serve their stockholders." I don't know how true that is, but even if it is partially true, is it time to revisit this duty to ensure that it isn't completely skewing the whole system unfavourably?

  3. veti Silver badge

    "That makes me smart"

    The funniest thing about this whole hilarious story is the spectacle of President "what tax returns?" Trump inveighing against tax avoidance. You couldn't make it up.

    1. Nick Kew Silver badge

      Re: "That makes me smart"

      ... not to mention the kneejerk reaction seen here that Amazon should be funding Trump.

      What the tax-efficient multinationals have shown is that corporation tax is not fit for purpose. Governments are making noise about it and discussing idiocies, but at the same time they're also (more quietly) Doing Something. Here in Blighty that's taken the form of reducing corporation tax while introducing new taxes on dividends instead. Time will tell how that turns out.

      1. Charles 9 Silver badge

        Re: "That makes me smart"

        You mean TAX (full stop) is not fit for purpose. Hell, government may not be considered fit for purpose in a world of transnationals who can play countries against each other. It's like what you see in William Gibson's Sprawl books where companies became big enough to be sovereign unto themselves.

      2. keith_w

        Re: "That makes me smart"

        Dividends are usually taxed in the hands of the payees, so unless you are planning to tax dividends as they are paid out by the company, they will be taxed by the destination country, not the sending one.

      3. Shady

        Re: "That makes me smart"

        Dividend taxation was introduced to punish small businesses and one man bands (contractors) who had the temerity to play, quite legally, within the existing tax rules.

        The aim was to get those legitimately outside of IR35 to pay a similar amount of tax as those inside, seeing as they'd failed (up to this point) to score any significant IR35 victories. It was a grudge tax.

  4. DougS Silver badge

    Because Trump lied when he called it "tax reform"

    It was nothing of the sort, it was just tax cuts. So the corporate rate went from 35% to 21%, so the deductions and credits they get (some of which ought to have been modified or eliminated when they cut rates by so much) are enough to wipe out their tax bill completely.

    1. DCFusor Silver badge
      Holmes

      Re: Because Trump lied when he called it "tax reform"

      As has every other pol when using the word reform*.

      We had patent reform in the US. Now we have "first to file" vs "first to invent" which obviously advantages the big boys who can file on everything remotely imagined.

      We had the "Sonny Bono" copyright reform. And it's still going to be awhile before I can copy Gershwin without breaking the rules.

      Health care reform caused insurance to be mandatory, since people couldn't afford insurance that covers reality, it became bronze, silver etc plans that are so full of holes it actually cost most of my income to buy one, and then resulted in higher prices at the doctors - because they can - and the higher prices are the CO-PAY! I cheated and dropped that, paid the fine, and get off much cheaper as the docs aren't bad people and only charge me double what the tests cost since they know it's coming out of my hide. Which is more than a 75% discount! Ditto prescription drugs. Reform my ass.

      We have bank reform - which lead to CDS's and banks being able to sell loans before the ink was dry to some investment bank. So the bank selling the loan had no reason to care about it being paid back.

      Combine that with Blythe Masters' financialization that lets, in effect, someone buy fire insurance on *your* house without your knowledge, and a can of petrol and a pack of matches...and we had 2007's great time. And that was, on the surface "good intentions" to let people in the ghetto buy their home and get a stake in the community, so they'd help clean things up.

      You'll note that this really isn't a partisan thing - it's a money/power vs the regular guy thing.

      Every single "reform" in history has benefited the big guys. It's actually quite difficult for it to be otherwise, a lot of the simplistic schemes I hear are easily ripped apart - "all governments act in concert" was a real belly laugh given history long past and recent (-exit) in the EU alone. "Get rid of money". Every single one of these schemes (including many not mentioned here) has a ridiculous assumption at its base.

      As someone smarter than me said - it's just as illegal for a rich guy to steal bread, or sleep under a bridge as it is for me - the law is in some sense "fair". Thing is, I don't need to steal bread and I have a nice house (and no debt). The poor guy doesn't - nor does he have my lawyers. True reform is HARD - assuming they even really wanted that. As it is, lobbyists...vote on laws to find out what's in them...stuff like that. Anyone paying attention knows.

      To top it off, you don't even have to know law or have any experience with unexpected consequences to get to power - we have Trump and Cortez (and lots of others) proving that one. They don't even have to take a test, like for...any other professional job.

      *Not only reform, but "fair" and "just" and "spending cut" and "tax cut" and ... almost all the other words they use to tell us how great they are, and how they're going to pick that other guy's pocket to give you cool stuff. We never seem to wise up to the fact that to the vast majority of the world, that "other guy" is me.

    2. DougS Silver badge

      Re: Because Trump lied when he called it "tax reform"

      Not true, Reagan did actual tax reform in 1986.

  5. sinsi

    Imagine if these big companies actually paid the tax due, the government could do something like, I dunno, pay for a big wall...

    1. vtcodger Silver badge

      The Wall

      No, No. Mexico is paying for the wall. They're just a bit late with the payments. Give 'em a bit of time to pawn Baja California or something. They'll come through.

      1. Anonymous Coward
        Anonymous Coward

        Re: The Wall

        Mexico will default on the payments for the Wall. The foreclosure will happen when El Trumpo orders in the Marines to invade Cancun (there is a semi decent Golf Course nearby) and embark in an all out trade war on Mexico.

        Oh wait, Mexico mever agreed to pay for the wall.

        sigh.

        Since when has that stopped the Yanks from sending in the troops eh?

  6. Nunyabiznes

    Tax

    So, by losing 25000 jobs in the NYC metro area this is a win by OAC and her cohorts? So what if there is a tax break? The long term taxes (especially in a tax heavy area like NYC) will outweigh the short term loss (assuming the breaks are structured correctly). The taxes on wages and other knock-ons add up quickly also.

    This is aside of whether I think (as I've stated before) that there should be a flat tax on all income including sales, stock dividends, etc. at the Fed level. I've also stated that if a company is paying less that what your tax laws were supposed to make them pay because they figured out a LEGAL way of reducing them via your tax laws - well that isn't the company's fault. They beat you at your own game.

    1. vtcodger Silver badge

      Re: Tax

      The median Amazon wage was $28,446 last year. (https://www.washingtonpost.com/business/2018/08/24/thousands-amazon-workers-receive-food-stamps-now-bernie-sanders-wants-amazon-pay-up/?noredirect=on) Not a lot in a high cost of living area like New York City. Maybe the locals are exercising better judgment than their leaders in deciding to pass on 25000 probably mostly low paying jobs from an outfit that seems more than a bit predatory.

      1. midcapwarrior

        Re: Tax

        The median is heavily weighted to the warehouse workers. Not in anyway comparable to the expected HQ2 workforce.

        1. Roland6 Silver badge

          Re: Tax

          >The median is heavily weighted to the warehouse workers. Not in anyway comparable to the expected HQ2 workforce.

          If Amazon's HQ is anything like other companies HQ's, there will be lots of low paid clerical/admin/temp staff.

    2. Anonymous Coward
      Anonymous Coward

      Re: Tax

      Losing Amazon probably was a win for NYC. The analysis was that it would take a LONG time for NYC to recover all the cash and land given to Amazon. So long that it probably wouldn't happen. Residents were rightfully concerned that Amazon would be taking up precious space that could be used by companies with better local benefits.

    3. veti Silver badge

      Re: Tax

      "Tax credits" should be illegal. Period. Publish your city's formula for calculating taxes, then apply it evenly to everyone. If that doesn't work out for you, then change the formula. But there is never a defensible case for giving special treatment to individual firms, or people for that matter. That way lies cronyism, corruption and inefficiency all round.

    4. Charlie Clark Silver badge

      Re: Tax

      Such moves are almost always announced with the promise of lots of new jobs. The loss of jobs elsewhere is almost never reported at the same time, and Amazon is a prime example of employment displacement. And, once the dust settles, it usually turns out that the number of jobs actually created is less than initially announced. The Foxconn plant in Wisconsin is a good example of this.

      1. John Brown (no body) Silver badge

        Re: Tax

        "And, once the dust settles, it usually turns out that the number of jobs actually created is less than initially announced."

        And the highly paid corporate lawyers probably have the contracts drawn up in such a way that there is no corporate penalties for not living up to the promises while still getting the contracted tax breaks, free land, etc.

        1. Charlie Clark Silver badge

          Re: Tax

          the contracts drawn up in such a way that there is no corporate penalties for not living up to the promises

          They don't really need to. The contracts will almost never be that specific and the associated verbiage usually says things like "upto" or "around" X jobs. But Foxconn's deal in Wisconsin even includes provisions for cutting out the courts.

      2. Roland6 Silver badge

        Re: Tax

        >And, once the dust settles, it usually turns out that the number of jobs actually created is less than initially announced.

        In part that is because (certainly this applies in the UK) they include the construction jobs in the "jobs created figure" so quite often you will see it trumpeted that some warehouse development will create 250+ jobs, but reading the small print (if available) shows that only 20~30 jobs will exist post construction... As most people don't bother to read the small print (eg. Brexit) they tend to support the scheme because it is creating 'jobs', where 'jobs' is a creatively defined ambiguous unit, intended to misinform and be used as a political soundbite.

    5. John Brown (no body) Silver badge

      Re: Tax

      "So, by losing 25000 jobs in the NYC metro area"

      You can't lose what you never had. IIRC, those jobs were going cost the city $48,000 each. Sounds more like NYC dodged a bullet.

  7. Anonymous Coward
    Anonymous Coward

    Tax credits almost never pay for themselves - by the time they are used up, the company having milked said credits backs some leased trucks up to their leased buildings and take away their records and a few proprietary robots, leaving all their leased equipment (leases having conveniently ended when said tax credits end) and move to a new place where new tax breaks are being offered.

  8. Tim Worstal

    This is really very easy

    "How is that even possible?"

    They invested more than they made in profits.

    Next?

    1. Nick Kew Silver badge

      Re: This is really very easy

      I'm not an accountant, but I thought I had some idea of the definition of profit. Isn't it basically the difference between income and expenditure? The latter includes investment, so a reported profit of $11.2bn would be after accounting for investment.

      Who is being misleading here?

      1. Roland6 Silver badge

        Re: This is really very easy

        >so a reported profit of $11.2bn would be after accounting for investment.

        No what is being reported is net income of $11.2bn. So this is the trading profit available for investment. What is so interesting is that Amazon are finding ways to 'invest' this amount of income and so have nothing left on which to declare as a profit for tax purposes.

        1. Nick Kew Silver badge

          Re: This is really very easy

          Have you read the actual Amazon figures? I haven't: I've only read the story here.

          El Reg clearly call the number a profit. The one use of the words "net income" is very loose, and I wouldn't read anything into it unless I had some external reason to suppose it was not in fact a profit as reported.

          As for investing sufficient to avoid tax, I've done that myself for quite a few years. Not on Amazon's scale of course, but I've had some big tax rebates (the biggest in five figures UK£) and my tax-free dividend income roughly speaking pays the rent.

          1. Charlie Clark Silver badge

            Re: This is really very easy

            As for investing sufficient to avoid tax, I've done that myself for quite a few years.

            Lots of do that, but there is more than a difference in scale for companies like Amazon doing this because their effective cost of capital is so low. This, as much as anything else, is what gives them a competitive advantage in any particular area.

            Futhermore, Amazon's strategy benefits certain types of investors only by favouring share price increases over dividends, a point that was made by someone else on this forum years ago. This is why Amazon actively cross-finances, or subsidises the low-margin warehousing and logistics business with profits from AWS. It's all more or less legal, but it's disingenuous to pretend that any company can do it.

          2. Roland6 Silver badge

            Re: This is really very easy

            >Have you read the actual Amazon figures? I haven't: I've only read the story here.

            I followed the supplied links and read the sources. Additionally, a quick google finds the actual Amazon statement....

            As for El Reg use of the word 'profit', this is very common misrepresentation of company reports in the media. Hence why before posting I checked the sources...

            >my tax-free dividend income roughly speaking pays the rent.

            It is highly unlikely to be tax-free, however, I accept that you can structure your tax affairs so as to pay no personal tax on investment income eg. make use of the PEP/ISA wrapper.

            >As for investing sufficient to avoid tax, I've done that myself for quite a few years.

            As Charlie Clark points out it is the scale of 'investment'. Additionally, whilst we can say that Amazon have avoided a $2.3bn US company tax bill, I suggest the total (taxes avoided) figure is potentially closer to $3.5bn as many transaction taxes will also have been avoided.

  9. jelabarre59 Silver badge

    why even NYC?

    I don't even understand why Amazon would have wanted to move into NYC anyway. Only companies that have no other choice keep their HQ in NYC. It's such a stinking morass of crap I would have thought, if they could have picked anyplace, NYC would be the last place they'd want to go.

    1. Anonymous Coward
      Anonymous Coward

      Re: why even NYC?

      Because companies that look for employee who have to be paid high wages need to look for them where they like to live.

      I've seen here many times governments thinking they could develop underdeveloped areas trying to put high-tech industries there. Actually, all of those projects fail because it's hard to find skilled workers in underdeveloped areas (which usually have bad education institutions as well), and those who have the skills won't move to live in "shitty" places with bad services (schools, healthcare, transportation, etc.) and probably are away from main commercial, leisure and travel hubs, especially when they are in great demand and thereby can choose where to work and live.

      That also means that attractive places are just stupid trying to subsidize those companies - they will have to come anyway, so let them invest their billions without giving away taxpayers money. Sure, don't be just "against" - and you may work to remove some unneeded roadblocks, but there's no need to bend over...

      1. DCFusor Silver badge

        Re: why even NYC?

        WHile in the main you are correct, I made my own fortune by living in the boonies and consulting for places like companies in Silly Valley and DC where the cost of living is at least 5x higher. They didn't blink at paying rates that made me rich where I live.

        Just last night I was in a video chat with some job seekers in Silly Valley and environs. What it takes to rent an apartment there would buy you a farmhouse here with nearly 100 acres of land...food is cheap in farm country, and our schools are top rate, our crime basically zero.

        It's the myth that urban areas are more culturally rich and better in some other sense that keeps that stuff the way it is. In fact, look at CA in the US - poop, needles and homeless camps....none of that here in "deplorable flyover country" - and I didn't have any trouble recruiting smart people for my company either - because they could see this too and were, well, smart. Smart and talented people are everywhere, as are pretty good tech colleges (often state ones that are less expensive). Rather than seeing the graduates move away, you just grab them before they do...it's not hard, but that might be a little complex for a company that depends on a moronic HR dept to get hires by using job sites and demanding 10 years experience in something that has only existed half that long. Which is a good way to get liars I suppose.

        1. Anonymous Coward
          Anonymous Coward

          Re: why even NYC?

          If you like to live in a farm.... many don't. Especially millennials, they seem obsessed with urban life - because that's what the market is selling them - at higher prices. The lucky ones can live in a bubble where they don't see poop, needles, and homeless people.

          I agree that US (and not only) went the wrong path as it became too much polarized on a couple of cities, with a big void, and too many issues, between. Now it looks like the accretion disk around black holes.

          Anyway, not always your job can be just consulting - there are jobs that requires a far different way of working. And you may also want to work where there's competition among companies to hire talent, or you may find yourself stuck with a single company unless you relocate your whole family.

          Moreover executives are the first to want the company HQ where they "feel good". "Sweatshops" can be everywhere. Still, there are places which are totally not fit to sustain a given type of company site.

          It would be far better if there was a better distribution across the country, but big companies will always go the easiest and most remunerative way - unless they get one of the rare idealist CEO - which the board will remove ASAP.

        2. Anonymous Coward
          Anonymous Coward

          Re: why even NYC?

          Well each to his own but as someone who knows the rural life intimately, I can stand on a hill somewhere in the British Isle and look over a landscape that my ancestors have farmed for more than 4000 years (according to recent genetic surveys) there is a very good reason why the young people who grew up in rural area cannot wait to get the hell out. Opportunity and independence from the claustrophobia of rural / small town life.

          Sitting in my reasonably expensive apartment in SF I have immediate access to literally hundreds of opportunities within one hour drive at any give time over the last few decades. And being here makes a huge difference to making things happen. Immediately. This is a life and professional experience I could have had literally no where else in the world. Location. Location. Location.

          As for the drug problem, street people etc I dont know how it is in your home state but in California, and the rest of the West Coast, the really serious drug / alcohol abuse problems are out in the rural areas. Far far worse than in the big cities. Out in the Central Valley, Sierra Foothills. High Desert etc. Over the years all the worst stories I have heard of parents having problems keeping their kids out of trouble have been in rural / small town locations, not in the big cities. Rural / small town life is very very boring for most kids so more likely to go astray.

          And almost all the junkies, winos and street people you see on the streets here are from out of town. Drawn by the idiot progressive politicians (mostly out of towners) free stuff policies. In the parts of the City were normal folk live you see almost zero street people. Which makes them very nice places to live.

          The reason why rural areas have lost 90% of their population over the last century is because for most people big cities and especially suburbs are very very nice places to live. All things considered. A good compromise of opportunities, amenities and quality of life.

    2. Charles 9 Silver badge

      Re: why even NYC?

      I can think of three big reasons why Amazon wanted to pick New York at the time: La Guardia, JFK, and Newark Liberty. One of their criteria WAS easy access to air travel, and it's hard to beat a metropolis with not one but THREE major airports within spitting distance of each other (probably why DC was selected, too--they have two, and the third, Baltimore-Washington, may not be within spitting distance but a stone's throw is the next best thing).

  10. Regi

    The global companies have better finance teams than the national governments put together, Each country needs to work on its own tax laws, or have a "NATO" (for example) style agreement to deal with global companies - tax wise, then they can be rinsed for what they owe

  11. slartybartfast

    I would quite happily avoid using Amazon, except for a lot of products there is simply no other choice.They seem to have a monopoly, which is why they get away paying no tax as they know people will keep buying stuff from them. To think we used to have a thing called choice. Now it's 'buy it from Amazon as it isn't available anywhere else'.

    1. Anonymous Coward
      Anonymous Coward

      Yes, you'd think there was some sort of antitrust legislation to limit bad behaviour by dominant companies...

      <Expletive deleted> politicians not doing their job. Again.

      :(

    2. Doctor Syntax Silver badge

      "They seem to have a monopoly, which is why they get away paying no tax as they know people will keep buying stuff from them."

      As written that's a non sequitur. You need to turn it around. The reason why they (a) have a monopoly and (b) pay little or no tax is because they keep investing in building the business. That means that the operating profit gets swallowed up so there's no profit on the bottom line and the result of the investment makes it impossible for others to compete. At some point, however, they'll have to stop growing. Any growth curve that looks exponential is really the start of a sigmoidal curve.

      The trick is going to be to decide when to stop eating the operating profit and start paying dividends. If they invest in facilities they don't need once they start to saturate the market they'll be throwing away cash. That happens. Right at the start of my working life I found I was in the middle of a small but well-known in its field business going bankrupt because it had done just that and the investment wasn't even on the stuff that made its profits.

      They're not unique in investing all the available income for years before they start paying divies; I remember the same things being said about Microsoft.

  12. Raj

    Wait, so *I* can’t deduct state and local taxes beyond $10K anymore but Amazon can deduct a billion of it ?

  13. DeKrow
    Mushroom

    The example being set...

    With more and more of these large companies and high level politicians being exposed (Panama, Paradise Papers) as using as many techniques as possible to avoid paying appropriate taxes and shifting money through various offshore tax havens, there are two things that bother me:

    1. These are people and companies held up to be respected and act as examples to the general populace as to how to behave. Unlike economics, this WILL have an actual trickle down effect.

    2. This leads towards an "if you can, then do" attitude, no matter the legality or morality. It basically justifies outright thievery. You failed to secure it, so you lose ownership of it.

    Failure to bring world leadership to heel is encouragement to the rest of the populace to seek their own methods of advantage.

    1. Anonymous Coward
      Anonymous Coward

      Re: The example being set...

      "Failure to bring world leadership to heel is encouragement to the rest of the populace to seek their own methods of advantage."

      As they say, who's got the time? If they're not putting their nose to the grindstone 28 hours a day, they'll get left behind and left for dead, triggering the preservation instinct.

  14. Anonymous Coward
    Anonymous Coward

    Why does Amazon even need a large HQ?

    I thought the point of the company was to do things on the Internet?

  15. Anonymous Coward
    Anonymous Coward

    Amazon get nothing from me

    They are too expensive.

  16. Mateus109

    Capitalism is broken, no?

    I'm no expert but surely this shows capitalism no longer works in today's economy. Surely capitalism relies on the 'underdog' taking down big corps; the cycle then continues. But these big corps have become seemingly invincible!

  17. Cuddles Silver badge

    Quite an important bootnote

    "Eagle-eyed readers will notice that Amazon pegged its net income for 2018 at $10.1bn, though the ITEP reckons it was $11.2bn. That's because the latter figure is the pre-tax total."

    In other words, Amazon actually paid $400 million in taxes in the US, and $1.1 billion in total worldwide. Still a tax rate of <10%, but rather more than the pretend negative number claimed by the article. Just because they didn't pay federal taxes doesn't mean they didn't pay tax, it just happens that the US devolves a lot of things like taxes to a lower level, mostly state but even down to county and city. There are plenty of very real issues regarding taxes and how to handle them with multinational companies, especially once the internet starts getting involved. Making up nonsense about the likes of Amazon paying negative tax when they actually pay hundreds of millions isn't going to achieve anything other than obfuscating any sensible attempts to discuss the matter.

  18. Random Q Hacker

    Tax the shareholders

    What makes more sense?

    - Tax the workers who are already paying for their paycheck with their labor.

    - Tax the businesses, which will pass that cost on to the consumer.

    - Tax the investors, who lobby for ever growing profits at ever lower tax rates, with virtually no effort on their part. The true welfare class.

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