Tech Giants Paid $96 Billion Less Tax Than Stated, Campaigners Allege

Tax activists have levelled a serious allegation against what they call the ‘Silicon Six’, namely Facebook, Apple, Amazon, Netflix, Google and Microsoft.

The Fair Tax Foundation on Monday announced that they had undertaken a forensic analysis of the tax conduct of the Silicon Six, and alleged they had paid $100 billion less in tax than they had claimed.

It said that it had analysed the “tax conduct of the Silicon Six” in December 2019, for the decade 2010-18/19. Then in May 2021 it had repeated this analysis for the ten years 2011 to 2020 inclusive, and “it was discovered that the $100 billion tax gap is as enormous as ever.”

Tax allegation

According to the Fair Tax Foundation, “there is still a significant difference between the cash taxes paid and both the expected headline rate of tax and, more significantly, the reported current tax provisions.”

It said that it had analysed the Form 10-K annual filings in the United States, where the ‘Silicon Six’ companies are incorporated.

It added that it had also “selectively reviewed the company accounts of various European and UK subsidiaries, focussing attention on the cash taxes paid (as opposed to the total tax and / or current tax provisions).”

It alleges that over the period 2011 to 2020, the “gap between the expected headline rates of tax and the cash taxes actually paid by the Silicon Six was $149.4bn.”

Over the same period, it alleges “the gap between the current tax provisions and the cash taxes actually paid by the Silicon Six was $96.3bn.”

The Manchester-based campaign group said that the bulk of the shortfall almost certainly arose outside the United States, “given that the foreign current tax charge was just 9.3 percent of identified international profits over 2011-20.”

It said that in terms of ranking, “none of the Six is an exemplar of responsible tax conduct. However, the degree of irresponsibility and the relative tax contribution made does vary. Amazon has paid just $5.9bn in income taxes this decade, whilst Apple has paid $100.6bn and Microsoft has paid $55.3bn,” it said.

It said that according to its 2019 ranking, Amazon alleged had the worse tax conduct record, followed by Facebook, then Alphabet/Google in third.

Fourth worst was alleged Netflix, then Apple and Microsoft.

‘Tax dodging’?

“Our analysis of the long-run effective tax rate of the Silicon Six over the decade has found that there continues to be a significant difference between the cash taxes paid and both the headline rate of tax and, more significantly, the reported current tax provisions,” said chief executive of the Fair Tax Foundation, Paul Monaghan.

“These figures provide solid evidence that substantive tax avoidance is still embedded within many large multinationals and nothing less than a root and branch reform of international tax rules will remedy the situation,” said Monaghan. “Fortunately, the new US administration has recently light a fire beneath the multilateral discussions that have been slowly progressing under the auspices of the OECD.”

“The Biden-Harris proposals would see many of the incentives underpinning profit-shifting to tax havens removed, and would see the very largest multinationals taxed not just on where subsidiary profits are booked, but where real economic value is derived,” said Monaghan.

“This would have a seismic impact on the likes of Amazon, Apple, Facebook, Google and Microsoft (who have tax dodging hard-wired into their organisational structure), with billions of additional taxes paid across the world,” said Monaghan.

“We could be on the cusp of a once in a generation moment, but world leaders at the forthcoming G7 and G20 world leader summits need to grasp the nettle, step up and engage with the agenda much more positively – the benefit to public services across the world could be immense,” Monaghan concluded.

Amazon response

Amazon has disputed the analysis from the Fair Tax Foundation.

“Amazon is primarily a retailer where profit margins are low, so comparisons to technology companies with operating profit margins of closer to 50% is not rational,” an Amazon spokesperson told the Guardian newspaper, who added the calculations were “extremely misleading”.

“Governments write the tax laws and Amazon is doing the very thing they encourage companies to do – paying all taxes due while also investing many billions in creating jobs and infrastructure,” said the Amazon spokesperson. “Coupled with low margins, this investment will naturally result in a lower cash tax rate.”

And it is worth pointing out that last month Amazon won its appeal against the European Commission, which had ordered the e-commerce to pay 250 million euros ($303 million) in back taxes.

The EU’s general court said that the commission, the EU’s executive arm, had failed to prove that there was an illegal tax advantage given to Amazon by Luxembourg, where Amazon has its European headquarters.

Tax pursuit

The issue of American firms using certain low tax European nations such as Ireland or Luxembourg to base their operations, has long been a bug bear for the European Commission and European governments.

In 2019 for example, Amazon was accused of paying less tax in the UK over a 20 year period, than some major UK retailers pay in a single year.

That came after an investigation found that Amazon UK Services paid £61.7m in UK corporation tax over a 20 year period, during which time it achieved £7bn in total revenues over the two decades.

But because Amazon directs most of its European sales via its Luxembourg HQ, it pays very little tax.

And the European Commission is not enjoying much success in its pursuit of US firms paying tax.

In July last year, for example, Europe’s second-top court rejected an EU order that Apple had to pay 13 billion euros ($11.8bn) in Irish back taxes.

The Commission however is appealing that ruling.