It may not be the best example, but it is the most jarring: internet sales powerhouse Amazon.com made US$11.2 billion in profits last year, but won’t be paying federal income tax in the United States. Instead, it’s actually getting a $129 million tax credit.
The year before, the company made $5.6 billion in profits — and also paid no federal tax.
The company isn’t doing anything wrong: it’s simply taking advantage of federal tax breaks, credit for past losses, and a 14 per cent decrease in the U.S. corporate tax rate brought in last year by President Donald Trump’s government.
Some experts argue that’s as it should be, that Amazon had big losses as a start-up, and should be allowed to offset those losses against present-day profits. As well, they argue, the company should be allowed to write off its healthy investment in technology, and the list goes on.
The argument? That, down the road, the company will pay much higher taxes.
The company isn’t doing anything wrong: it’s simply taking advantage of federal tax breaks, credit for past losses, and a 14 per cent decrease in the U.S. corporate tax rate brought in last year by President Donald Trump’s government.
But one of the prices of living in a country is paying taxes — because it’s not only individuals who receive steady benefits from governments.
Companies benefit from Western democracies and the workforces that those democracies support; they obtain an educated workforce at no cost to them, and, in countries like Canada, those employees receive medical care as well — meaning companies don’t have to carry the same medical insurance. Not only that, but proper medical care means that companies benefit from having skilled workers return to work after illness or injury and don’t have to pay to train new workers from scratch.
But the benefits don’t end there.
Companies benefit from stable government, from protection of their property by federal and municipal police services, and by protection from capricious seizure of company assets by rogue governments. Operating in politically stable countries increases shareholder value, because corporate risk is lowered. Streets and sidewalks are paved, roads are built, and a major company like Amazon has its products travel on a taxpayer-supported infrastructure base that includes everything from air to road to rail. On top of all of that is the particular government financial breaks, loans and grants that companies often avail of.
Yet, companies argue regularly for cheaper taxes, and find ways to get those lowered tax rates.
For a period of time, customers buying from Amazon in the United Kingdom actually made their purchases from a division in Luxembourg, allowing the company to take advantage of a much lower tax rate.
It’s popular to argue that corporate taxes have to be competitive so that companies themselves can be competitive. But what corporate taxes actually have to be is commensurate with the benefits that companies gain.
An endless battle for the bottom in corporate taxes only benefits corporate bottom lines.
