The largest U.S. technology companies – from Amazon to Facebook – have come under fire for not paying what some believe is their fair share in taxes, and a new study says the companies may be paying even less in corporate taxes than what has been reported.
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The six Silicon Valley giants – Amazon, Facebook, Apple, Netflix, Google and Microsoft – contributed to a combined tax gap of $100 billion over the past decade, a new study conducted by Fair Tax Mark found.
The tax gap refers to the difference between companies’ tax provisions (what a company states that it expects to pay) versus the amounts actually paid in cash taxes to the government. Between 2010 and 2019, the gap between provisions and cash taxes was $100.2 billion cumulatively among the six companies.
“We conclude that the corporation tax paid has been much lower than is commonly understood,” Fair Tax Mark chief executive Paul Monaghan said in a statement.
Researchers noted that the companies continued to shift profits through tax havens – like Bermuda and Luxembourg. The bulk of the shortfall, they suggest, likely arose from outside of the U.S.
One common strategy companies have been said to use is the “Double Irish with a Dutch Sandwich,” which is an international tax evasion strategy that involves channeling profits first through an Irish company, then through a Dutch company, and then to another Irish subsidiary headquartered in a location – like Bermuda —with lower or no income taxes. The method uses features of the various countries’ tax codes to dramatically reduce tax burdens.
The report is based on annual 10-K filings in the U.S. It looked at tax payments from 2010 through 2019.
In a ranking of the six, Fair Tax Mark credited Amazon as having the poorest tax conduct, reporting the company has paid just $3.4 billion in income taxes since 2010. Amazon’s cash taxes paid are said to amount to just 12.7 percent of profits over the decade, despite the fact the U.S. headline tax rate was 35 percent for the majority of that time.
In a statement to FOX Business, Amazon said the suggestion in the report are wrong and that it had a 24 percent effective tax rate on profits from 2010 through 2018.
"Governments write the tax laws and Amazon is doing the very thing they encourage companies to do – paying all taxes due while also investing many billions in creating jobs and infrastructure," the spokesperson said.
Facebook ranked second, having the lowest foreign current tax charge ratio of all six companies – at just 5 percent of profits.
Facebook has been contacted for comment.
Google was next, as researchers said its cash tax paid was 15.8 percent of profits.
A spokesperson for Google told FOX Business the report’s “interpretation” of how it pays taxes “ignores the reality of today's complicated international tax system, and distorts the facts documented in our regulatory filings.”
“Like other multinational companies, we pay the vast majority - more than 80% - of our corporate income tax in our home country,” the Google spokesperson said.
The companies have become frequent targets among a number of 2020 Democrats on the campaign trail – from Independent Vermont Sen. Bernie Sanders to Massachusetts Sen. Elizabeth Warren, who have launched a number of attacks against the large corporations for failing to pay more in taxes. Each has come up with proposals that would require some companies to contribute more to the country’s tax revenues.
Warren, for example, unveiled the Real Corporate Profits Tax, which would apply to companies that report more than $100 million in profits. The first $100 million would be untouched, but for every dollar of profit above $100 million earned, the company would pay a 7 percent tax. That tax would be levied in addition to other taxes owed under the current tax structure. According to Warren’s calculations, her proposal would cost Amazon $698 million.
Netflix, Apple and Microsoft have been contacted for comment.