While main street Americans pay record tax levels on personal income, property and via sales taxes, big tech companies with armies of lawyers and tax accountants continue to cheat the system, according to the latest reports from online retailer Amazon.
According to regulatory filings, Amazon’s main German operating unit paid just $16 million in tax in 2014, despite recording $11.9 billion in sales to German customers. Germany is Amazon’s biggest market outside North America, but until recently all sales and almost all profits were channeled via lightly taxed Luxembourg companies.
The structure has raised the ire of EU regulators, as the company effectively pays no tax despite massive sales in the region.
“Corporate tax is based on profits, not revenues. E-commerce is a low-margin business and highly competitive, and Amazon continues to invest heavily around the world, which means our profits are low,” an Amazon.de spokesman said.
Yet the companies play games with expenses and revenues, shifting expenses from lightly taxed jurisdictions, like Ireland and Luxembourg, to heavily taxed ones like Germany in order to bring down the tax bill.
Tech companies are the prime offenders, as Google, Apple, Amazon, Ebay and host of others all utilize the elaborate structures to book expenses in heavily taxed jurisdictions.
Under pressure from UK regulators, Amazon said last week it had introduced changes in the United Kingdom, Germany, Spain and Italy starting May 1st so that future sales would be booked in these countries.
While tax experts said the new arrangement could require Amazon to pay more tax in future years they are still likely to shift expenses and revenues to more favorable jurisdictions to avoid taxes.
It’s worth remembering that taxes on personal income were supposed to be just a “temporary measure” to help fight World War Two.
65+ years on they still remain a burden to everyday Americans, while big corporations have engineered themselves a pass thanks to armies of accountants and lawyers.