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Tax target Amazon now leads reform drive

Washington—A longtime lightning rod for critics of corporate tax avoidance, Amazon now wants to lead the way on reform.

Amazon chief executive Jeff Bezos this week endorsed a higher corporate tax to help fund infrastructure as part of a “balanced solution that maintains or enhances US competitiveness.”

The move by Amazon comes after years of criticism by activists who claim it pays little or no corporate taxes. 

According to the Institute on Taxation and Economic Policy, an advocacy group, Amazon had an effective 9.4-percent federal income tax rate last year on profits of $20 billion after two years of paying no taxes.

The low rate is partly explained by the Trump-backed 2017 reform which cut business taxes. But Amazon also benefitted from “depreciation breaks” on its investments and on stock options, according to the institute.

President Joe Biden, who is proposing a $2-trillion infrastructure program funded in part by increasing the corporate tax rate from 21 percent to 28 percent, last month singled out Amazon as an example of corporate tax avoidance.

Biden referred to a 2019 study showing many of “the biggest companies in the world, including Amazon... pay not a single, solitary penny of federal income tax,” the president said.

Amazon has defended its policies, engaging in heated debated with political leaders at times, saying that its investments offset taxes as intended by the tax code.

“We pay every penny we owe. Congress designed tax laws to encourage companies to reinvest in the American economy,” Amazon tweeted in response to a 2019 comment from Biden as a candidate.

Amazon noted that its tax provision from last year—the closest approximation to federal taxes paid—was $1.7 billion, and that it paid billions more in payroll taxes, customs duties and state and local taxes.

Daniel Shaviro, a New York University law professor and taxation specialist, said Amazon and other firms often use “aggressive tax planning” and can sometimes outmaneuver authorities, but mostly are just taking advantage of what the law allows.

“You can put the blame on the political system,” Shaviro said.

The Amazon news comes amid a debate on harmonizing international tax rates for multinational firms to limit shifting of profits, and with increased scrutiny on big firms that use loopholes to cut their taxes.

According to ITEP, at least 55 profitable, large US firms paid no federal income taxes in 2020, including food conglomerate  Archer Daniels Midland, delivery giant  FedEx and sportswear maker Nike.

“Corporate tax dodging hurts ordinary Americans by reducing resources for health care, road repair and other essentials,” said a recent blog post by ITEP executive director Amy Hanauer.

Lilian Faulhaber, a Georgetown University tax law professor, said the tax code is constantly being pressured as companies take advantage of incentives designed to spur growth, sometimes going beyond what was envisioned.

With tax changes being implemented in various US states and around the world, “I think the tide is starting to turn and it there may be more pressure on these companies than there has been for a while to pay more in taxes,” she said.

Topics: Amazon , Institute on Taxation and Economic Policy , Joe Biden , Lilian Faulhaber , Amy Hanauer
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