The US government is investigating the ‘Silicon Six’ tech firms – Amazon, Meta, Alphabet, Netflix, Apple, and Microsoft – for allegedly avoiding billions of dollars in corporate taxes.
The ‘Silicon Six’ – Amazon, Meta, Alphabet, Netflix, Apple, and Microsoft – have been accused of paying almost $278 billion less in corporate income tax over the past decade compared to the statutory rate for US companies making the same profits.
Tax Avoidance: A Hardwired Business Model?
Analysis by the not-for-profit organisation, ‘Fair Tax Foundation’ (FTF), found that if one-off repatriation tax payments were excluded, the average corporate income tax contribution of the six firms fell to 16.1% over the past decade. This is significantly lower than the US average of 29.7%. The FTF claims that tax avoidance has become ‘hardwired’ into the business models of these companies.
Inflated Tax Payments and Contingency Positions
The report also found that the companies had inflated their stated tax payments by $82 billion over the same period by including contingencies for tax they did not expect to pay. This suggests that the firms have been using complex financial structures to minimize their tax liability.
Tax avoidance refers to the use of legal means to minimize tax liability.
It involves structuring financial transactions and arrangements to reduce taxable income, often by exploiting loopholes in tax laws.
Unlike tax evasion, which is illegal, tax avoidance is a legitimate strategy used by individuals and businesses to manage their tax obligations.
According to the OECD, global corporate tax avoidance costs governments over $500 billion annually.
Tax authorities worldwide are working to close loopholes and ensure fair taxation.
A Lack of Transparency and Influence
The FTF’s chief executive, Paul Monaghan, pointed to ‘aggressive tax practices’ such as contingency tax positions, as well as the enormous political influence and economic power wielded by these companies. The report highlights the significant role that lobbying has played in shaping US tax policy.
Tax Breaks and Low-Tax Jurisdictions
Much of the Silicon Six’s overseas revenue is subject to low-level rates of corporate income tax in the US via a tax break for foreign-derived intangible income. Additionally, sales are also subject to lower rates of income tax because of lower profit margins and booking profits in low-tax jurisdictions.
Tax Rates: A Comparison
While Netflix had the lowest rate of tax actually paid compared with profit booked, at 14.7%, Microsoft paid 20.4%. Amazon‘s corporate tax rate was 19.6%, well ahead of Netflix, Meta (15.4%), and Apple (18.4%).
