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December 22, 2021 24 mins

In this episode we take a look at how Amazon is able to legally get away with avoiding paying billions in taxes, and how they refuse to funnel the money they saved back into the workforce they've made it off of.

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Episode Transcript

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Speaker 1 (00:01):
I want to thank every Amazon employee and every Amazon
customer because you guys paid progress. You guys paid problems.
This is Megacorp, an investigative podcast exposing some of the
world's most unethical corporations. This series is about Amazon. I'm

Jake Hanrahan, journalists and documentary filmmaker. Mega Corp is produced
by H eleven for cool Zone Media. In this episode,
we're going to be stepping out of the warehouse and

taking a look at Amazon's financial situation. So as we
already know, they're making an unbelievable amount of money, specifically
since COVID hit. So let's start by taking a look
at their corporation to x in Europe. Last year, Amazon

made forty four billion euros in sales income in Europe.
That's thirty eight billion pounds and fifty billion dollars. I
guess how much corporation tax they paid? Fuckal corporate tax
is spased not on revenue but on profit. Amazon was

able to claim that they didn't make any profit. Quite
the contrary, they actually had some losses. It's unclear at
this point where those profits are generated, where those profits
are registered. At the moment, it's quite opack and it's
quite complicated. Amazon, which has been in Luxembourg since two
thousand three, has a very nice arrangement with Luxembourg. At

the time when it was under former Commission President johnkla Junker,
they were able to pass some sweet deal. This deal
remains unclear in many aspects. Luxembourg is known for being
a country that offers quite good tack incentives, quite good
financial incentives for companies like Amazon. If you're not from
the UK or Europe, where you're just not familiar, you

might not know what corporation tax is. So let me
just explain it briefly. The best description I've seen so
far is from the WHICH website. That's w H I
c H not which like sorcery WHICH, WHICH is a
nonprofit consumer protection organization here in the UK. They do

some great work. So here's what they say about corporation tax. Quote.
Corporation tax is paid by businesses in the UK and
is calculated on their annual profits in a similar way
to income tax for individuals. The corporation tax rate has
been for all limited companies since April twenties sixteen. Prior

to this, the rate varied depending on the company's profits.
Unlike in the visuals, companies don't receive any kind of
tax free allowance and therefore all profits are taxable. However,
there are a number of expenses and deductions that can
be claimed to reduce your bill end quote. Now that

last sentence is where companies with a lot of money
can really go to town on how little tax they pay.
So to put this Amazon Corporation tax situation into perspective
and to really emphasize how infuriating it is, I thought,
why not get a little personal. Basically, I'm going to

use myself as an example for a minute. So I
run a small media business. It consists of several different
projects under the umbrella of my limited company that is
popular front this series Megacorp, another series I've done que Clearance,
various different projects in video documentary as well. It's all

above board. Everything is registered here in the UK. I
don't have any full time staff as I can't afford it,
so anyone that works for me on any project does
so on a freelance basis. Also, let me just say this,
due to Britain's outrageous house prices and admittedly my bad
credit score because when I was a youth, I was

an absolute idiot. I don't have enough money to be
able to buy my own house right now. I've been
renting since I moved out when I was fifteen years old,
and I'm now thirty one. Now you might think, what
has that got to do with anything, Well, it's just
a little bit more as salt in the wound when
you hear that hour was the Bezos ball in a
minute now? Anyway, don't get me wrong, I am not

in a bad situation at all at all. But bearing
all this in mind, you can imagine how annoying it
is knowing that I paid more corporation tax in than
Amazon did, a company with one point three million staff
and a net profit last year of three hundred and
eighties six billion dollars. Or in regards to the house,

Bezos brought another house last year and it cost him
one hundred and seventy five million dollars. Now, you might
be listening to this bit thinking, Jake, you sound kind
of bitter here. Well, yeah, I am. Let me be honest,
I'm not against people making money, and I don't think
all rich people should be cast off into the sea

or whatever. It is. A lot of the online radicals believe.
But if you're making insane profits off the back of
a workforce that we now know being treated awfully, I
think the absolute very least you can do is payback
into the country by accepting that you must pay the
correct tax. Now, don't get me wrong, I am definitely

not a big fan of any state, and I am
certainly not a fan of my government here in the UK.
But this is the way things are, Honestly, Sadly, they're
just not changing. If you're a mega rich corporation making
money under these conditions, you should have to pay the
proper tax under these conditions. Why Well, because if you,

or me, or your average man and woman on the
street earning normal money don't pay their taxes, we go
to prison. Your average man or woman is just not
rich enough to higher top of the range accountant firms
that help you dodge tax. Clearly, Amazon is I say
this because what they're doing is actually perfectly legal. Now.

I don't know about you, but for me, that makes
it all the more frustrating. Clearly, the system as a
whole is morally bankrupt. Europe has become a playground for
mega corporations. They're able to do acrobatics with their tax

payments because they afford to make it work for them.
You might just say, oh, well that's business. Well, yeah,
that is business. But at the end of the day,
people are getting harmed, people are getting abused, while these
businesses pay us fuck all back into the country. That is,
companies like Amazon willingly abused their most important workers were

paying as little as possible back into the country where
they live, the country where they make money off of. Now,
I guess it's all about economics and politics at this stage,
but personally that doesn't sit right with me. Unfortunately though,
when it comes to numbers, I am an absolute dunce.
So I thought, why not talk to someone that does
understand all of this a lot better than I do,

an accountant. This is what accountant and writer Adam James
Pollock had to say about Amazon. Amazon UK have their
own distribution service called amams on UK services and though
the pre tax profits increase, the tax bills have been
falling over the past couple of years. So of the
thing is Amazon can get around this by paying certain

employees and shares as a form of something called equity compensation.
And as an employee, you know if your mid level
managerial upwards, you can get paid through shares through like
for example, the UK Government's Share and Center Plan, and
for employees it's kind of beneficial as well because you
can keep the shares in this for five years, you
don't pay any income tax or national insurance on them,

so it kind of helps you out there, and then
if you sell them as well, you don't pay any
capital gains tax. But obviously this helps Amazon as well
because they can count as an expense so on their
balance sheet they can offset that against their corporation tax.
So even though they're paying their employees employees making money,
Amazon's making money, nothing's getting done the tax there. So

in the UK employees can give up to thirty six
hundred pounds worth of free shares per employee per year.
So these shares are in Amazon's global corporation, Amazon Inc.
It's not the UK a company. So these are increasing
on like a drastic rate over the past couple of years.
So again upper managerial level has been helped out so much.

Amazon is being helped out so much, and the people
that are losing out as usual is the general public.
Since in the UK h m r C can collect
on it and the lower level workers who can be
concerted in this way, so they still have to pay
national insurance all that sort of stuff. And Luxembourg has
something to do with this, right from what I was reading. Yes,
so tax paid on the UK profits isn't actually publicly

available information because UK customers are booked through the UK
based branch off a Luxembourg based Amazon company which handled
lots of European you know branches, so France, I think
Spain as well. That Luxembourg subsidiary is technically a loss
making company because it has process work can carry forward

these losses over several years and if you're not booked
as making a profit it you can't actually pay tax
on it. If you if you're making losses, there's nothing
that they can tax there because the taxes paid in profit,
not on sales, so you know they're selling loads of
stuff as they do, they still can't get taxed on it.
But as well as that, there's something like called the
independent entity principle, and through that subsidiaries like say for

example Amazon Web Services based in the UK that yeah,
it's like kind of a separate company, so they are
viewed in legalizes only providing support services to Amazon, rather
than actually being a part of the company, there are
separate entity so it's not viewed as an Amazon company.
It's viewed as like just any service providing company. So

that means that they can apply a principle, you know,
it's one sided method to determine appropriate tax or profit
taking this subsidiary in isolation from the group, and it
applies a benchmark rate based on things such as operating costs.
So for Amazon in the industry it's in you've got
services such as warehousing and delivery and marketing. They're all

generally very low margin businesses. So when you take these
Amazon like subsidiary service providing branches, those smaller ones are
also generally low margin businesses, so the profits they declare
are very low. And this links back Luxembourg as well,
because since the accounts for the Luxembourg you know overall

parent and company if you want, are not broken down
on a poor country basis because they don't have to
do that legally, so why would they. We actually have
no idea how much tax the UK branch will play.
It's not possible to work out unless Amazon declares it
and they don't have to write Now they don't have to.
They're absolutely no need to. And it's the same for

all the Amazon companies in Europe that are branches off
the Luxembourg one. So chances are it's just treated as
the same as the web service as example, where it's
just seen as supplying services, managing set else in that case,
and then declared very little profit because of that. Wow.
So this is a massive loophole essentially, right, I mean legal,

but a loophole. It sounds like, yeah, it's legal, completely legal,
but that kind of makes it worse because it's less
converted out in the open, so they can't know that
there's nothing you can do about it, and they're just
laughing at you in a way. After hearing that, it
will probably be no surprised. But it's not just Europe
where Amazon has been swerving their taxes for several years.

Amazon paid no federal income tax in America in eighteen. Specifically,
Amazon paid zero dollars US federal income tax on their
eleven billion dollar profits that year. In fact, not only
did they pay no federal income tax on their profits,
they actually received a one hundred and twenty nine million

dollar tax rebate from the federal government Effectively, that's a
tax rate of minus one percent. One of the main
reasons Amazon is able to do this, though, is due
to the Tax Cuts and Jobs Act, a federal tax
bill enacted by US Congress in twenty seventeen. This bill

lowered these statutory corporate tax rates from thirty five percent
to twenty one percent. This made the rate lower whilst
also leaving open tax loopholes, which, according to the Institute
on Taxation and Economic Policy senior fellow Matthew Gardner, allow

profitable companies to routinely avoid paying federal and state income
taxes on almost half of their profits. In a report
from February one, Gardner wrote, a great explanation of all this.
Now this is quite a long quote, but I think
it's worth it. He really sums it up here, Gardner said, quote.

The mechanisms the company is using to drop its effective
tax rate mostly unchanged. The company saved one point eight
billion dollars using tax breaks for stock options, and it
saved six hundred thirty nine million dollars using various tax
credits over the eighteen to twenty period. Amazon also enjoyed

the appreciation breaks, although they had no net effect on
the company's tax bill in Appreciation breaks allow a company
to deduct the costs of investments in equipment much more
quickly than the equipment wears out. Proponents in Congress claim
this encourages investments and helps the economy overall, but more

likely it rewards companies making investments they would have made anyway.
The effects of depreciation breaks are complex. Part of the
effect is to move tax payments further into the future,
even though the net effect in the long run reduces
the company's tax liability. This makes it important to look
at a company like Amazon over several years, and from

this perspective, it's clear that the nation's tax code barely
lays a glove on Amazon. Amazon's tax avoidance is consistent.
Over the past three years, Amazon paid an effective federal
income tax rate of just four point three percent on
US income. Over the past ten years, Amazon's effective federal

tax rate on fifty seven billion dollars of US pre
tax income was just four point seven percent, especially remarkable
given that the legal rate was thirty five for most
of this period. For any other company, one point eight
billion of current federal income taxes would be interpreted as

a signed the company's tax accountants had taken the year off,
but in Amazon's case, the one point eight billion dollars
the company paid is over sallowed by the two point
three billion it did not pay last year. These unpaid
taxes are especially troubling because Amazon's pandemic experience is utterly
different from the existential threats facing entire industries. Far more

typical of the economy is companies reporting created sales and
zero profits. In this setting, it's vital that our tax
system in America should perform as advertised, and when Amazon
shelters more than half its profits from tax, our tax
system is clearly in need of reform end quote. So basically,

a complicated combination of various tax credits, deductions, and investment
in equipment has allowed Amazon to pay it little or
no taxes for a long time, completely legally. In March,

he won. This got so much attention that US President
Joe Biden addressed Amazon by name when saying he planned
to stop big corporations using all of these tax loopholes.
He said, quote a fireman, a teacher paying twenty two
percent tax, Amazon and ninety other major corporations paying zero

in federal taxes. I'm going to put an end to
that end quote. Of course, he's yet to put an
end to that. However, it seems that Amazon has been
on his mind for a while. Here's what he had
to say about Amazon's tax situation in before he was
even elected president. I think if Amazon should start paying

their taxes. Okay, I don't think any company. I don't
give a damn how big they are. The Laura Almady
should absolutely be in a position where they pay no
tax to make billions and billions and billions of dollars
Number one. Now, to play devil's advocate here or whatever
you'd call it, is this the fault of Amazon or
the state? Who's to blame here? Ethically, Amazon has chosen

the path of hard core tax avoidance, but that is
not the same as tax fraught. It could be argued
that Amazon cares very little about ethics based on the
way they treat their warehouse workers, So why should they
care about paying their taxes properly when legally they've done
nothing wrong. Effectively, in the eyes of the law, they

sort of have paid it properly. The problem, it could
be said, is the system itself. In response to Joe Biden,
Amazon's senior Vice President for Policy and Press, j Kenney
tweeted the following quote. If the R and D tax
credit is a loophole, it's certainly won. Congress strongly intended.

The R and D tax credit has existed since one
was extended fifteen times with bipartisan support, and was made
permanent in twenty fifteen in a law signed by President Obama.
End quote. Now J. Carney would know. He was Obama's
White House Press secretary and ironically enough, Biden's communications director

when he was the Vice president under Obama. Now, I
hate to say it, but J. Carney has a point here.
There is no way this tax loophole was left in
by accident. Many politicians in the US, both Republican and Democrat,
talked to about changing tax loopholes that they actively benefit from.

If the system is corrupted, why shouldn't a company like
Amazon take advantage of it? Let's hear what else boy
And had to say in that interview. And I came
from the corporate capital of the world, Delaware, and I'm
not anti corporate, but here's the deal with idea that
they made a several trillion dollars and all the studies
show that fifty percent went to buy back their stock,

thirty seven percent to make sure their stockholders got rewardingly,
then nine percent for research, development, racist employment, et cetera.
Come on, man, that's not the capitalist system, isn't it.
It seems like Amazon are just playing the system as
the politicians set it up. But whatever, they can do
what they want, but they're not Robin Hood out here

or anything like that. They managed to make an absolute
fortune by avoiding tax, especially throughout the pandemic, and they
chose to reinvest almost none of it into the warehouse
workers who are breaking their next to make sure the
company stays running on time. They're swerving tax, treating their
workers badly, along with a ton of other scandals that

will go into later in the series. At the very least,
I think they could stop acting like an ethical company
in their press releases and when they're talking to the public,
because clearly that is just not true. Now here's something else.
This will again be no surprise to you at this point.
But Bezos himself is of course no stranger to tax avoidance.

According to a twenty twenty one Pro Publica article, Jeff
bezos Is personal wealth grew by a massive ninety nine
billion dollars from the years twenty fourteen to eighteen. However,
he reported a growth of a measly four point two
billion dollars. He paid nine hundred and seventy three million

dollars tax on that, which is a hell of a
lot of money, sure, but in context to what he
really made, he paid a tax rate of less than
one percent zero point nine eight percent. To be exact,
the richest man in the world paid less than one
percent tax on ninety nine billion dollars. Now, look at

all this, it reminds me of the aura borous, the
snake that eats its own tail. Amazon wouldn't be able
to legally avoid all this tax the way they do
if the rich and powerful politicians of this world hadn't
set the game up to be rigged in the first place.
Now I'm not really even trying to get all political here.

I think it's clear it's a fact that if you
have enough money, you can avoid certain laws so effectively
that you can do it legally. That's exactly what Amazon
has been doing with their taxes. We're taking a break
over Christmas, so the next episode of Megacorp will be

with you at the stat of January two. Tune in
then to hear about yet another Amazon scandal as we
dive into the many cases of Amazon spying on their
own customers and helping international intelligence agencies to do the same.
It's all a out to get even darker. Mega Corp.

Is made by my production company H eleven for Cool
Zone Media. It's written, researched, and produced by myself, Jake Hanrahan.
It was also produced by Sophie Lichtman. Music is by
Some Black, graphics by Adam Doyle and sound engineering by

Splicing Block. If you want to get in touch, follow
me on social media at Jake Underscore Hanrahan. That's h
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