I think they invest massively in accounting and legal and corrupt arrangements to avoid taxes, so it must simply be their desire. Their tax paperwork didn't accidentally end up $129m up instead of $3b down.
It's a while since they didn't make a profit, in large part because of AWS growing to currently north of a million an hour net profit on margins their retail side can't replicate.
The article refers to $11 billion in net profit. They haven't known what to do with all their money ever since convincing the tech industry AWS was cheap, this month AWS will net around $700 million in profit.
It is simply their desire now to not pay taxes, not pay their workers well, to clone 3rd party vendor's products under their own brands, to copy the occasional SaaS hosted on AWS etc.
The article actually says they received $129 million instead of paying taxes on $11 billion profit!
The thing is, companies don't pay tax on sales, but on profits. And Amazon is a company with a very strange attitude to profit: it doesn't seem to like it. In the year 2012, it made a worldwide loss of $39m, even as it had sales totalling $61bn. That year was an aberration, with a costly acquisition weighing the company down, but previous years have been similar. 2011 saw just $631m net income on worldwide sales of $48bn, and in 2010 – the company's most profitable year to date – it scraped $1.15bn of profit on revenue of $34bn.
631/48000=?
1,15/34=?
Those are your margins. If they are less than T+400bps[1] you are "losing money" for investors. Unless, there are other investors looking to take the stock off your hands.
It's hard to imagine where all those investors think the extra profits will come from. Do they expect Amazon to suddenly announce one day that it has finished trying to grow, and will be raising prices immediately? Or do they think that eventually, every single one of its competitors will have given up, and folded beneath the company's relentless expansion?
Unless you have a real answer for this, you are betting on the greater fool theory. Of course, you may have a better answe than this. [Digging around a bit, it seems to (/may) be tax avoidance. Amazon is eating fulfillment costs in lock-step with its increasing gross profits on product sales].
It's a bad thing. They're actively avoiding tax and hiding profits. It's not accidental and it's not all because they are reinvesting. They have decided that they shouldn't contribute to things that don't directly benefit them while using the tax payer built infrastructure and lobying to keep it that way. They're using this tax advantage to kill competition.
Amazon intentionally doesn’t make a profit. It’s an excellent tax avoidance strategy and since their shareholders are OK with it a fantastic way to put their competition out of business.
Amazon’s “losses” have mostly been a tax dodge. They would for example invest in software R&D without presenting it as an investment from profits but rather an operating expense.
I think Amazon is simply reinvesting in growth while avoiding corporate income taxes. Since they tend to move into proven industries, they are not likely to lose any of the re-invested money.
They are effectively taking profit in the form of Amazon equity (via increased stock price) and not paying any taxes.
I haven't looked into Amazon's finances extensively, but I bet this is at least partly due to Net Operating Loss. In US tax law net operating loss means that you can deduct losses for prior years from this year's earnings. The funny thing about this is that by losing money you actually add an asset to your balance sheet (deferred tax assets). Since Amazon has lost a lot of money in the past that probably helped with their 2017 taxes. Another interesting thing about this is with the new tax law cutting the corporate tax rate to 21%, many companies had to take a charge against earnings in order to write down the value of the deferred tax assets. If you lost $1M last year, you had $350,000 in deferred tax assets that got written down to $210,000 meaning your company technically lost $140,000, even though you got a tax cut. Accounting is truly amazing.
Correct me if I'm wrong, but isn't that just due to their accounting preferences?
Amazon has had the capability of making profit for years, but prefers to expense everything off in an effort to grow rather than pay increased taxes.
Their skyrocketing market cap hasn't been due to a change in the company's direction so much as investors gradually realizing this strategy and the raw growth potential of where Amazon has positioned itself.
You are confusing earnings and revenues. Amazon had revenues for its retail business of $60bn. But, in order to get that revenue, they spent a lot of money, maybe even more than that. The IRS doesn’t tax revenue, only profits - and Amazon’s profit last year was $5.6bn. And it seems like they may have paid $0 to the IRS in taxes, although they paid quite a bit to foreign governments, which is deductible.
I'm all for giving Amazon flack where it's deserved. This tax witch-hunt isn't one of those cases.
2016 pre-tax income: $3.89 billion
2016 income tax: $1.43 billion
2016 income tax rate: 36.7%
That's one of the highest rates on earth.
2015: $1.57b pre-tax income. $950m income taxes. That's a 60% rate.
They don't generate much taxable income. What exactly are they supposed to be paying substantial taxes on other than that?
Should they be paying £30m (£50m?) in taxes on that £19.5 billion in European revenue instead? Ok, let's go with that, they're both meaningless figures. How is that a substantial matter to nail Amazon for (of all things) given the epic scale of tax schemes throughout Europe?
Maybe taxes on profits were created so that companies invest their profit instead of hoarding it or giving it to shareholders, creating jobs and infrastructure in the process. As far as I'm concerned, Amazon is using its profits (or lack thereof) exactly as intended.
Amazon is renowned for choosing growth investments over profit. The latter is taxable; the former isn't. Therefore it's possible that their tax reporting is entirely legitimate. I welcome investigation that shows otherwise, but in the lack of any actual evidence, I don't think it's reasonable to claim tax dodging.
The fines are obviously not intended to bankrupt them.
Amazon had $7.8 billions in profit this quarter, 10% of that should hurt badly enough to course correct, shouldn't it?
Amazon barely makes any profit because they invest nearly 100% of revenues back into new, non-revenue-generating initiatives, to avoid paying taxes and set themselves up for potential future revenue streams in new areas. They could have huge profits overnight if they wanted to, they'd just have to cut back on developing delivery drones and funding astroturfing campaigns on hacker news, and they'd also have to pay taxes.
Also recall Amazon purposely tries to “stay flush” with expenses and revenue, so naturally this article is true. Amazon sees to avoid taxes, and invests in avenues of expense that benefit it rather than benefitting the tax man. The theory being “how much tax to you pay on net zero income?”
In 2021, Amazon EU S.à r.l. had a revenue of over 51 billion euros
Can't find numbers on profit, but companies such as amz are experts on creativity, as indicated by eg this quote:
Amazon paid zero corporation tax in Luxembourg last year, despite seeing a record sales income of €44 billion.
As first reported by The Guardian, accounts for Amazon EU Sarl published online showed that despite making billions of dollars in sales, the company's Luxembourg unit, which oversees retail in countries across Europe, made a €1.2 billion loss and therefore paid zero tax.
Not only did the company not have to pay corporate tax, but it was also handed €56 million in tax credits to offset future tax bills in the event that it does turn a profit. That also comes on top of €2.7 billion in losses that have been carried forward and can be used to offset future tax bills.
So you are saying that since Amazon paid no taxes they made absolutely no money on the sales? Arranging the company structure so that billions in profits are seen as losses in the bottom line is ridiculously easy and makes the whole corporate taxation system a joke.
https://www.cnbc.com/2017/10/03/eu-to-fine-amazon-millions-i...
It's a while since they didn't make a profit, in large part because of AWS growing to currently north of a million an hour net profit on margins their retail side can't replicate.
https://www.recode.net/2017/4/27/15451726/amazon-q1-2017-ear...
Suggests Q3 2015 was the last time they lost money... and lost can mean anything with enough accounting.
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