Big Tech accused of $278 billion tax underpayment over the past decade

• The Fair Tax Foundation (FTF) alleges that six major U.S. tech companies — Amazon, Meta, Alphabet, Netflix, Apple and Microsoft — paid nearly $278 billion less in U.S. corporate income tax over the past decade than they would have at the 29.7% statutory rate.
• The analysis of $2.5 trillion in profits and $11 trillion in revenue reveals an average effective tax rate of 18.8%, dropping to 16.1% without one-time repatriation taxes. Companies like Amazon and Netflix were noted for using low-tax jurisdictions to reduce their tax burdens, with Netflix having the lowest tax-to-profit ratio at 14.7%.
• The report highlights the use of “profit-shifting” to low-tax countries and “contingency tax positions” to boost reported tax contributions. These tactics, along with tax incentives like the U.S. Foreign-Derived Intangible Income (FDII) break, have allowed Big Tech to save billions in taxes.
• The issue of tax avoidance is longstanding, with global efforts like the OECD’s 15% Global Minimum Tax and U.S. BEPS reforms attempting to curb the practice. However, loopholes remain, and the tech sector’s significant lobbying power further complicates reform efforts.
• FTF’s CEO, Paul Monaghan, criticizes the current system as designed to enable tax avoidance, urging governments to close loopholes and adopt global minimum tax rules. The report emphasizes the need for accountability, as public trust in corporate tax practices erodes, with 63% of Americans believing corporations pay too little in taxes.

In a landmark report released Monday, the Fair Tax Foundation (FTF) accused six major U.S. tech giants — Amazon, Meta, Alphabet, Netflix, Apple and Microsoft — of paying nearly $278 billion less in U.S. corporate income tax than they would have owed at the 29.7% statutory rate over the past decade. The analysis, covering 2015–2024, reveals the so-called “Silicon Six” paid an average of 18.8% of their profits in taxes, with some companies hiding profits in low-tax jurisdictions and exploiting tax incentives. FTF’s findings expose a system critics say has “hardwired” tax avoidance into corporate DNA, raising calls for a global minimum tax and stricter regulations.

Key findings: Tax rates and aggressive tactics

The FTF study examined 2.5 trillion in combined profits and 11 trillion in revenue generated by the six companies. Their average effective tax rate dropped to 16.1% when excluding one-time repatriation taxes, a financial tool companies use to recover profits held offshore.

A critical method for this disparity is profit-shifting, where multinational firms route profits through countries with lower tax rates. Amazon was singled out for booking a large chunk of its UK income in Luxembourg, a low-tax haven. Netflix had the lowest tax-to-profit ratio at 14.7%, while Microsoft’s 20.4% rate was the highest among the group. Apple (18.4%), Meta (15.4%) and Alphabet (17.9%) also fell below the U.S. average.

The report also highlighted “contingency tax positions” — estimated liabilities unlikely to materialize — boosting companies’ reported tax contributions by $82 billion over the decade. For instance, Amazon’s spokesperson stated its UK operations are fully declared under UK law, adding its investments in infrastructure and low margins naturally reduce tax rates. Meta and Netflix defended their compliance with local rules, but declined to address broader tax strategies.

Historical context: A decade of tax evasion battles

The issue isn’t new. Global responses like the OECD’s 15% Global Minimum Tax proposal in 2021 and the U.S. Base Erosion and Profit Shifting (BEPS) reforms aimed to curb tax avoidance. However, loopholes persist. For example, the U.S. Foreign-Derived Intangible Income (FDII) tax break allows companies to lower taxes on overseas revenue. The FTF estimates Big Tech has saved $30 billion through FDII in the last three years alone.

The tech sector’s political influence looms large. FTF’s CEO Paul Monaghan noted companies spent millions lobbying governments, citing their sway over policies favoring low-tax environments. This context is amplified as the U.S. and UK negotiate trade deals potentially including tax cuts for U.S. firms, and as tech execs like Bezos and Zuckerberg attended Trump’s second inauguration, signaling industry clout.

Corporate responses: Compliance or “hardwired” avoidance?

While the companies claim adherence to tax laws, the report counters this by framing avoidance as systemic. Amazon defended its approach, stating it “pays all taxes due” while investing over $1.2 trillion in the U.S. and €250 billion in Europe since 2010. Microsoft, Alphabet and Apple declined to comment.

FTF’s Monaghan rejected the “just following the law” argument: “The fact that their tax rates are half the national average shows there’s a system designed to let them do this.” He urged governments to close loopholes and adopt global minimum tax rules.

Critics argue compliance isn’t the issue — public trust is. Researchers pointed to a 2023 Pew poll showing 63% of Americans believe corporations pay “too little” in taxes, a perception fueled by revelations like this report.

A crossroads for tax equity

The FTF’s analysis arrives as nations and businesses grapple with an interconnected tax system riddled with loopholes. With tech firms amassing unparalleled wealth and power, calls to reclaim lost tax revenue are mounting. The OECD’s proposed 15% global minimum tax, still unratified in major economies, and U.S. reforms like closing the FDII break could redefine the landscape.

As FTF concludes, the “Silicon Six” tax gap isn’t just a financial loss — it’s a democratic deficit. As lawmakers face pressure to act, the question remains: Can corporations’ moral obligations align with their complex financial structures, or will taxpayers foot the bill? The world watches, demanding accountability.

“This isn’t about greed — it’s about systemic failure,” Monaghan said. Until governments close the door on profit-shifting, the era of Big Tech’s tax free-pass may continue.

Sources include:

TheGuardian.com

Tribune.com

NationalTechnology.co.uk