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The “Silicon Six" Are Doing A Great Job Avoiding Taxes

Image via Corporate Finance Institute

The “Silicon Six" - Facebook, Apple, Amazon, Netflix, Google and Microsoft. Collectively, they had 2018 revenues in excess of $800 billion and currently have a combined market capitalization of more than $4.5 trillion. 

The "Silicon Six" have avoided over $100 billion in taxes between 2010 and 2019, according a report from Fair Tax Mark, a British organization that certifies businesses for good tax conduct. They analyzed 10-K filings to compare tax provisions, which is the amount corporations set aside to pay taxes, to cash taxes, which is the amount actually handed over to the government. 

The aggregate tax contingencies of the six companies has increased from $8.9 billion at the end of 2010 to $47 billion in 2019. An additional $5.7 billion in interest and penalties has been accrued over the same period.

"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. Investors need to look afresh at the future impact that this will have on company valuations and income flows," said Paul Monaghan, Chief Executive of the Fair Tax Mark. 

The report singled out Amazon as having the poorest tax conduct. Amazon paid just $3.4 billion in income taxes since 2010, or 12.7% of profits, while the federal tax rate in the U.S. was 35% for seven of the eight years analyzed. "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," said the report. 

Facebook, which the report ranks as having the second-poorest tax conduct, paid taxes on just 10.2% of profits since 2010, the lowest cash tax paid of the six companies. Facebook also had the lowest foreign current tax charge at just 5% of profits since 2010.

The "Silicon Six" appear to be taking advantage of tax loopholes overseas more than at home. The report finds the majority of the shortfall came from outside the U.S., as the foreign current tax charge was just 8.4% of identified foreign profits since 2010. Fair Tax Mark points out profits continue to be funneled to tax havens such as Bermuda, Ireland, Luxembourg and the Netherlands.

While none of this is entirely surprising, and certainly not limited to the "Silicon Six," it is just another example of the lengths corporations will go to generate value for shareholders. 

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