New Analysis Details 'Aggressive' Tax Dodging of Six Silicon Valley Giants--Totaling Over $100 Billion

Amazon, Apple, Facebook, Google, Microsoft, and Netflix have collectively dodged over $100 billion in global taxes so far this decade, according to an analysis released Monday by a U.K.-based tax transparency campaign group.

Later this week, the Fair Tax Mark plans to publish its full report on the tax conduct of the companies, entitled The Silicon Six and Their $100 Billion Global Tax Gap. The report's key findings were detailed on the group's website Monday.

"Our analysis of the long-run effective tax rate of the Silicon Valley Six over the decade to date has found that there is a significant difference between the cash taxes paid and both the headline rate of tax and, more significantly, the reported current tax provisions," said the Fair Tax Mark chief executive Paul Monaghan. "We conclude that the corporation tax paid has been much lower than is commonly understood."

The Fair Tax Mark studied each company's annual filings in the United States--where the tech giants are incorporated--as well as some quarterly filings and accounts of subsidiaries over the period of 2010-2019. The group found that the collective global tax gap between the expected headline rates and the cash taxes paid was $155.3 billion. The gap between the current tax provisions and cash taxes was $100.2 billion.

"The report suggests that the bulk of the shortfall almost certainly arose outside the United States, given that the foreign current tax charge was just 8.4% of identified foreign profits," the group explained. "Profits continue to be shifted to tax havens, especially Bermuda, Ireland, Luxembourg, and the Netherlands."

The Fair Tax Mark determined that Amazon, whose CEO Jeff Bezos is the richest individual in the world, "stands out as the business with the poorest tax conduct" among the Silicon Six. The headline corporate tax rate in the U.S. was 35% for most of the years studied, but the group found that Amazon paid only $3.4 billion in income taxes--just 12.7% of profit--during the analyzed period.

"The company is growing its market domination across the globe on the back of revenues that are largely untaxed, and can unfairly undercut local businesses that take a more responsible approach," the group said, warning that "the situation is unlikely to reverse soon."

The Guardianreported that Amazon pushed back against the findings, saying that the report's "suggestions are wrong" and the company had "a 24% effective tax rate on profits from 2010-2018."

Facebook ranked as the second-worst offender, having paid just 10.2% of its profit. Google, whose cash tax paid as a percentage of profit was 15.8%, came in third. Netflix, in the fourth spot, "proved to be the most difficult to rank," and had the same cash tax percentage as Google.

Facebook told The Guardian that "we take our tax obligations seriously and pay what we owe in every market we operate. In 2018 we paid $3.8bn in corporation tax globally and our effective tax rate over the last five years is more than 20%."

"When multinational corporations abuse their tax responsibilities to society, they weaken the supports that our economies need to work well and create wealth."
--Alex Cobham, Tax Justice Network

Apple ranked fifth. The Fair Tax Mark pointed out that although Apple "presents itself as 'the world's largest taxpayer' and it certainly makes the largest tax contribution of the Silicon Six," the company's cash tax paid as a percentage of profit was still just 17.1%.

"Microsoft, by a slim margin, has the least aggressive approach to tax avoidance of the six," the tax group concluded. Microsoft was co-founded by the world's second-richest individual, Bill Gates, and "makes the second largest tax contribution of the Silicon Six," according to the analysis. The company's cash tax paid as a percentage of profit was 16.8%.

The Fair Tax Mark's Monaghan said Monday that "the international tide is turning on the acceptability of corporate tax avoidance. The idea of countering the profit-shifting of Big Tech multinationals via the introduction of digital sales taxes has taken root in many countries."

Monaghan noted that the Organization for Economic Cooperation and Development (OECD) "is now leading multilateral efforts to address the tax challenges from digitalization of the economy, and is looking to ensure that profitable multinationals pay tax wherever they have significant consumer-facing activities and generate their profits."

Alex Cobham, chief executive of the London-based advocacy group Tax Justice Network, said that the group's new report "demonstrates why we need a fundamental reprogramming of the world's approach to tax, based on a unitary taxation."

Under a unitary taxation system, the global profits of multinational corporations would be allocated across the countries where the companies actually conduct business, which advocates argue would effectively make tax havens useless.

"When multinational corporations abuse their tax responsibilities to society, they weaken the supports that our economies need to work well and create wealth," said Cobham. "A unitary approach to tax means we can finally make sure multinational corporations contribute tax based on where they employ workers and do business, not where they rent mailboxes and hide ledgers."

"By ensuring multinational corporations pay their fair share locally for the wealth created locally by people's work--based on an agreed formula and supplemented by a minimum effective tax rate--governments can strengthen their economies to run smoothly and make a good life possible for everyone," he added.