The Silicon Six and their $100 billion global tax gap, examined the tax conduct of Facebook, Apple, Amazon, Netflix, Google and Microsoft since 2009 and found evidence of industrial-scale tax avoidance.
Researchers found that the gap between the expected headline rates of tax and the cash taxes actually paid was just $155.3bn, much lower than was previously thought.
In addition, the gap between the current tax provisions (the amount the companies expected to pay) and the corporation tax actually paid was $100.2bn.
All were found to be shifting profits to tax havens especially Bermuda, Ireland, Luxembourg and the Netherlands.
Amazon the top tax avoider in the Silicon Six
Amazon was found to be the worst culprit and has paid just $3.4bn in corporation taxes this decade, whilst Apple has paid $93.8bn and Microsoft has paid $46.9bn.
This is a staggering variance, especially as Amazon’s revenue over this period exceeded that of Microsoft’s by almost $80bn. Fair Tax Mark said this means Amazon’s effective tax rate was just 12.7% over the decade when the headline tax rate in the US has been 35% for most of that period.
Amazon said the report’s “suggestions are wrong” and that the company had “a 24% effective tax rate on profits from 2010-2018”.
Amazon said the company’s “profit margins are low” and that “naturally results in a lower cash tax rate.”
The report concentrates on the information contained in the Form 10-K annual filings in the United States, where the companies are incorporated. It has also selectively reviewed Form 10-Q quarterly filings and the company accounts of various European and UK subsidiaries, focussing our attention on the cash taxes paid.
Chief Executive of the Fair Tax Mark, Paul Monaghan:
“Our analysis of the long-run effective tax rate of the Silicon Valley Six over the decade to date has found that the corporation tax paid has been much lower than is commonly understood.”
Campaigners have also long been pushing for a change in international accounting practice to help bridge this tax gap. Alex Cobham, Chief Executive, Tax Justice Network, said:
“This report demonstrates why we need a fundamental reprogramming of the world’s approach to tax, based on a unitary taxation. 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”
The report also issued a stark warning to investors. The collective tax contingencies of the Six have rocketed in recent years, increasing fourfold from $8.9bn at the end of 2010 to $47bn in 2019.
They have also accrued a further $5.7bn in connected interest and penalties. In total, the Six have more than $50bn of unrealised net income due to their aggressive tax positions.
Paul Monaghan added,
“Investors need to look afresh at the future impact that this will have on company valuations and income flows. Not least because the OECD is now leading multilateral efforts to address the tax challenges from digitalisation of the economy, and is looking to ensure that profitable multinationals pay tax wherever they have significant consumer-facing activities and generate their profits.”