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.
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.
So no chance of this being addressed any time soon.
intersting, i still think the problem are… uhm brown people. /s
So you are saying it was “some Puerto Rican guy”?
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.
Companies do leave over time though. Look at the history of manufacturing in the US. So much of it has left for cheaper places to do business, such as China. Trump now has this fantasy of using tariffs to try to force companies to come back to manufacturing in the US, and he’s destroying the economy to try and achieve it.
People sometimes forget that tariffs are a tax. Other sorts of extreme taxes (like the 90% income taxes in the past) can have similarly devastating effects. Those effects may have been mitigated to an extent by the relative difficulty of moving around back then. Today it’s much easier to move. A big part of that is jet travel which allows you to closely monitor a factory in another country by travelling there to check up on it and hold meetings and plan.
Also note that just because a company leaves the US doesn’t mean its executives have to. They keep their wealth offshore while travelling freely between countries. The only way to prevent that is to impose draconian measures such as restricting freedom of movement and capital controls. This is the kind of stuff China does to its citizens to try to stop wealth from leaving the country and it’s not even all that successful at preventing the wealthiest people from moving their money out, despite being highly draconian.
Trump now has this fantasy of using tariffs to try to force companies to come back to manufacturing in the US, and he’s destroying the economy to try and achieve it.
The US economy is being destroyed because of the incompetent way that tariffs have been enacted with no notice, no planning and no logic.
A competent government would have announced tariffs years ahead of when they would be implemented and the % would slowly increment to the maximum level. That would actually give companies time to setup manufacturing in the country. And there would be certainty the tariffs were actually going to exist.
With Trump you have no idea if tomorrow tariffs will be 800% or 0%. So what is the point of moving manufacturing to the US, you may as well just bribe him and sit by his side massaging his moronic ego so he does you a favour.
The only way to prevent that is to impose draconian measures such as restricting freedom of movement and capital controls.
Measures do not need to be draconian. When wealthy individuals move away they’re typically just defining their primary residence as being elsewhere. They continue to own properties and luxury goods in the country. It would be trivial to impose taxes on those. In many cases the individual will continue to spend most of their time in their original country. Relaxed restrictions on non-domicile status permit this and it could be easily remedied.
Most wealth isn’t in the form of houses and luxury goods, it’s in the form of capital. Ownership of businesses, stocks, and bonds.
Trying to seize all that wealth in the stock market is even more difficult than seizing a car or a boat. As we’ve seen, the stock market can drop by billions and trillions of dollars within seconds. The truth is, that wealth doesn’t really exist in the same way that a rock or a tree exists. That wealth is based on people’s perception of value. It’s literally a figment of our imaginations and it can vanish in an instant if people come to believe it has.
Imposing a large wealth tax on people’s stocks and bonds would crater the market far worse than the Great Depression. It would trigger bank runs and total chaos.
Even if you announced a plan to gradually phase it in over several years, you’d have people phase out their market holdings faster than that. They’d switch to buying tankers full of oil or other hard commodities that they keep off-shore. And they’d use it to hold the country hostage as everyday living costs skyrocket.
Imposing a large wealth tax on people’s stocks and bonds would crater the market far worse than the Great Depression. It would trigger bank runs and total chaos.
That’s incredibly dramatic and simply unfounded.
Taxing capital gains is fairly standard worldwide. You aren’t taxing people for holding investments you tax them on the profit they make from them.
They’d switch to buying tankers full of oil or other hard commodities that they keep off-shore. And they’d use it to hold the country hostage as everyday living costs skyrocket.
All you’re describing is loop hole after loop hole all of which can be easily contained. This one in particular is extraordinarily specific and I highly doubt it wouldn’t already be covered by rules in a developed country.
There should be no way of “avoiding paying them”. What a strange argument to lower taxes.
I mean unless you’re going to turn the world into a giant prison, there’s tons and tons of ways to avoid paying taxes.
Life is not a matter of problems and solutions, it’s all about tradeoffs. When you think you’re solving one problem, you’re really creating another one somewhere else.
When it comes to society and the laws we make for it, this should be clearer than it is. Every law has intended and unintended consequences. For example, in the Code of Hammurabi most crimes were punishable by death. This would’ve had the unintended consequence that criminals would feel no deterrence against murdering all witnesses, since they faced execution either way when caught.
The theory of why we don’t maximize all punishments against criminals is called marginal deterrence. This theory applies way more broadly than just criminal law however. It applies to all laws and their effects on people’s behaviour within a society.
It even applies to biology and ecology more broadly, for example with parasites. The more resources a host spends defending against parasites the less resources it has available for other biological functions. A maximalist approach to fighting off parasites would leave the host with too few resources for survival, so would not be a good strategy overall.
