Over the past decade, major technology companies have avoided paying $278 billion in corporate taxes, according to a watchdog report
Tech giants paid 18.8% tax on $2.5T profits, avoiding $278B over 10 years.
The Fair Tax Foundation (FTF) has released a report that addresses the tax behavior of major technology firms, collectively referred to as the 'Silicon Six.' This group includes Amazon, Apple, Alphabet, Meta, Microsoft, and Netflix. Over the last decade, these companies have paid an effective average corporate tax rate of just 18.8% on a combined profit of $2.5 trillion, far below the average statutory rate for U.S. companies of 29.7%. Such actions resulted in $278 billion in taxes avoided, raising substantial debate concerning their tax contributions.
A key finding of the FTF's research is the use of aggressive tax strategies that these companies employ to minimize their tax liabilities. These include shifting profits to low-tax jurisdictions and ongoing exploitation of tax breaks like the U.S. Foreign-Derived Intangible Income (FDII) deduction. This specific deduction has allowed them to reduce their taxes to as low as 13% on certain overseas income, notably saving the Silicon Six $12 billion in tax relief for the year 2024 alone, and $30 billion over three years.
However, not all companies within this group have identical tax conduct. Amazon, for instance, is marked by the FTF as having the 'worst tax conduct,' attributed to its extensive profit-shifting practices, like transferring significant UK income to Luxembourg. Yet, compared to its peers within the group, Amazon's average tax rate over the decade was 19.6%, higher than Netflix's 14.7% and Apple's 18.4%, with Microsoft leading at 20.4%.
Beyond corporate tax strategies, the report reveals that about half of the group's revenue was generated overseas, though only 36% of these profits were booked outside of the United States, fueling questions about profit allocation and international corporate tax arrangements. The difference between the declared headline tax rates and the taxes actually paid by these companies has resulted in an impressive $277.8 billion shortfall over the same decade.
The response from the companies suggests compliance with the laws of all operational countries, with Amazon noting its investments' role in reducing margins and resulting cash tax rates. Despite these defenses, the digital giants increased lobbying efforts, spending $115 million in 2024 to influence governmental tax policies in the U.S. and Europe. Their practices face mounting global scrutiny, and unilateral policy measures like the digital services taxes in the UK, France, Austria, and Turkey are gaining traction in attempts to impose fair taxation on digital multinationals.
Sources: Fair Tax Foundation, TechSpot, Relevant Tax Strategies