The big American tech firms known as the “Silicon Six” have been accused of paying almost $278bn (£211bn) less corporate income tax in the past decade compared with the statutory rate for US companies making the same profits.
Amazon, Meta, Alphabet, Netflix, Apple and Microsoft generated $11tn of revenue and $2.5tn of profits over the past 10 years.
Yet they paid an average 18.8% in combined national and federal corporation taxes, compared with an average 29.7% in the US, according to the Fair Tax Foundation (FTF), which said the Silicon Six had “hardwired” tax avoidance into their business models.
Analysis by the not-for-profit organisation found that if one-off repatriation tax payments in the US connected to historical tax avoidance were excluded, the average corporate income tax contribution of the six firms fell to 16.1% over the past decade.
The companies had also inflated their stated tax payments by $82bn over the same period by including contingencies for tax they did not expect to pay, the report claimed.
Paul Monaghan, the chief executive of the FTF, said: “Our analysis would indicate that tax avoidance continues to be hardwired into corporate structures. The Silicon Six’s corporate income tax contributions are, in percentage terms, way below what sectors such as banking and energy are paying in many parts of the world.”
Monaghan pointed to “aggressive tax practices” such as the contingency tax positions, while the companies also exerted “enormous political influence as well as economic power”, spending millions of dollars on lobbying governments.
The report comes as the US tech companies’ influence has been highlighted by the presence of their bosses including Amazon’s Jeff Bezos, Apple’s Tim Cook and Meta’s Mark Zuckerberg at Donald Trump’s second inauguration.
A significant tax cut for such companies has reportedly been at the heart of discussions with the UK in its attempts to secure lower tariffs on its products exported to the US.
Would love to know how much these companies spent on reorganization and accounting to reduce their taxes paid.
One thing I think a lot of people miss with tax policy is that raising taxes on companies or wealthy individuals can often result in them paying lower taxes because they adjust to avoid paying them. There’s a “sweet spot” which I’ve heard is around 23% where they just pay the tax because it would cost more to avoid it.
While it may be true it’s absolutely ridiculous to simply accept that. If governments appropriately funded the departments responsible to taxation and acted swiftly to close loopholes then corporations would be unable to avoid taxes so easily.
Unfortunately the reality we live in is governments repeatedly reduce resources of tax agencies and either ignore loop holes or react to them at such a slow pace allowing them to be exploited year after year.
It’s not just local tax loopholes. Companies and wealthy individuals can leave the country if taxes get too high. Unless you’re willing to embargo the country they move to and become a pariah like North Korea then those companies can do business in your country from afar.
The only other solution is to create some kind of world government, but now you’re way outside the realm of practicality. Even if you started the process of forming a world government you’d have to find some way to avoid turning into a dystopian dictatorship. Look at what’s happening in the US right now and it should be clear how difficult it is to prevent that.
But back to tax policy: you have to ask yourself what you’re trying to achieve with taxes. Is it to pay for social programs and national defence is or is it wealth redistribution? If it’s the latter then you might have better ways of achieving that than corporate taxes. Why not land value taxes? You can’t take the land with you when you leave the country, so that loophole is closed.
Companies and wealthy individuals can leave the country if taxes get too high.
If the company is still doing business with your country then you are still able to tax them. As a loop hole it’s so easily remedied. Yet this myth that if we tax corporations or wealthy individuals they’ll simply leave and we’ll get nothing is absurdly pervasive.
Why not land value taxes?
Prescisely, there are so many options for taxing corporations and yet they’re not used.
