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Amazon Wins $1.5 Billion Tax Dispute Over IRS (reuters.com)
Amazon.com on Thursday won a more than $1.5 billion tax dispute with the Internal Revenue Service over transactions involving a Luxembourg unit more than a decade ago. From a report: Judge Albert Lauber of the U.S. Tax Court rejected a variety of IRS arguments, and found that on several occasions the agency abused its discretion, or acted arbitrarily or capriciously. Amazon's ultimate tax liability from the decision was not immediately clear. The world's largest online retailer has said the case involved transactions in 2005 and 2006, and could boost its federal tax bill by $1.5 billion plus interest. It also said a loss could add "significant" tax liabilities in later years. Amazon made just $2.37 billion of profit in 2016, four times what it made in the four prior years combined, on revenue of $136 billion.
Large corporations shouldn't have to pay taxes at all, given the many benefits to society they provide. I think once a business reaches a certain size, it should become exempt from income tax. That will give small business owners the incentive to grow and create more high paying jobs.
China's economy is expanding so fast, we've got to do something to keep them from taking over. Eliminating income taxes for large corporations could be just what we need to keep the Chinese menace in check.
Following the law is not cheating. If you don't like the law as written petition congress to change it.
Here
This isn't a tax cheat, at least not with respect to the U.S. The only reason the IRS tried to cash in on this is because the U.S. is almost unique in the world in taxing income that its citizens/corporations make abroad. If you're a U.S. citizen and you live full-time in (say) Canada and work and earn money there, and have nothing to do with the U.S. other than having a piece of paper saying you're a U.S. citizen, the IRS still expects you to pay U.S. taxes. The U.S. has negotiated tax treaties with some countries to offset the most egregious forms of double taxation - taxes on earned income (wages) in one country can be applied as a credit for taxes in the other. So I didn't have to pay U.S. taxes on my wages since I'd already paid Canadian taxes on it (the Canadian taxes were the higher of the two). But I had to pay both U.S. and Canadian taxes on interest on my Canadian bank account, even though I was living in Canada, the money in the account was only from my Canadian job, and the money never left Canada nor entered the U.S. If I'd bought a house in Canada and made money when I sold it because it appreciated in value, the IRS would expect a cut of that.
Nearly all other countries tax based on location. If you earn money in the country, they tax it. If you earn money outside the country, it's not their concern. Even if this is a tax cheat, it really has nothing to do with the IRS, other than being a money grab simply because nonsensical U.S. law allows them to do it. The profit in Luxembourg came from Amazon's European operations. If Luxembourg or the EU wants to sue Amazon over this, then that's their legitimate right. But it has nothing to do with the U.S. nor the IRS.
Following the law is not cheating. If you don't like the law as written petition congress to change it.
In general, you are right, what Amazon, and other big corporations do, is not cheating. They are using legal tax code to avoid paying the higher tax amount that they would owe if they weren't able to claim deductions, etc., much like we all do.
However, very few of us can afford to pay lawyers, lobbyists, think tanks, etc. to get in the face of the politicians 24x7x365 or hand them wholesale bills to game the system in our favor. That's also why the "petition congress to change it" statement is pure and utter bullshit. You, as an individual, can petition your congress-critter until you are blue in the face and they won't listen unless you have 100,000 of your friends screaming the same thing. The problem is that there are more pressing and "sexier" issues. When was the last time you saw a rally to fix the tax code? The only time people care is if they all of a sudden get a big hit on their paychecks, being nickel-and-dimed to death doesn't register.
It was bad enough that corporations have lobbying power. It got worse, in my opinion, when the Supreme Court struck down campaign finance restrictions. The balance of power in having a voice in legislation is so far skewed in the corporations favor that it's near impossible for a fair and balanced tax code.
Amazon isn't cheating, but they and other corporations definitely have their hands on the scale and in the end it amounts to the same thing.
This isn't a tax cheat, at least not with respect to the U.S. The only reason the IRS tried to cash in on this is because the U.S. is almost unique in the world in taxing income that its citizens/corporations make abroad.
Isn't this particular case the exact opposite of what you're talking about? Amazon (and it's fellow transfer pricing compatriots) would like to claim that income earned in a particular country wasn't really earned in that country through accounting sleight of hand.
If individuals could legally use transfer pricing, the US government would financially collapse. Fortunately for US citizens, the laws prevent this calamity by only allowing this privilege of legal tax minimization to entities with income in the billions of dollars.
I think everything you say is true. And you're right. It's not equitable.
But that's probably not the issue here. I assume the issue here is the "usual" one of a large corporation manipulating its books so that many of its profits on income generated in a higher tax jurisdiction (e.g. the US) magically gets booked/paid in a country where the taxes are lower. The poster child being Apple which disappeared billions in profits through a "Head Office" in Ireland that existed (exists?) only on paper. No physical office. No employees. Under Irish law, only about 50,000 Euros were taxable. In Apple's case, US taxes will be owed if the loot is ever returned to the US, but I doubt that will happen unless the wretched hive of scum and infamy currently installed in Washington allows the money to be repatriated tax free or at very low rates.
You can't see ANYTHING from a car, You've got to get out of the goddamned contraption and walk...Edward Abbey
Amazon made $2.37 billion, on over $400 billion invested. So an owner (investor) who put in $10,000 of their retirement savings made $59. Whoohoo!
Due to inflation, $10,000 in 2015 was worth only $9,700 in 2016, so they actually LOST $241.
Yeah, "making" less money than you're losing to inflation is pretty dismal.