How Amazon pays only $0 taxes- Secret behind it

This photo is credited by thinkmarketingmagazine.com

Amazon is not only one of the most powerful start-up grown in a very small time but it also made JEFF BEZOS a member of top 10 billionaires in the whole world. Amazon is the company which legally avoids the federal taxes in America till 2018. Let's know how they did this and analyze how good these methods are.

Well, the year of 2019 was not that good for Amazon because of the controversy between Jeff Bezos and New York times that affect the growth of Amazon and it seems to down 20% in comparison to last year.

But the year 2018 was the best year of Amazon so far as it doubled its profit to $11.16 billion with Zero taxes given.

Tricks Amazon used so save taxes

Well, Amazon is a reducing the taxes by the process of deduction but it is different from us. Amazon has 3 different categories in which he deducts the Taxpayers.

Research and Development Tax Credit

This is the first and very effective way of Amazon so save the taxes.

The 7% is used to the wages and other expenses of R&D department for that they got a deduction of tax and that really makes sense and the government will always want to stay advanced in the technology sector so they give tax reduction.

In 2018 Amazon saved almost $1.4 billion from only this Tax credit.

Trumps Tax code

In 2017 Donald Trump has made some changes on tax collection and he increased one form of deduction of taxes and that is depreciation.

Amazon has a big data servers and a huge infra to take care of so that they are getting the benefit of it and in 2018 they got 40% of tax deducted from it.

Stock-based compensation

You have listened that how a company is giving money to their senior employee not only in cash but also in company stocks and this is not just they want to give them employee ownership but actually saves a lot in their tax pays.

As Amazon give the money in stocks so it actually deducts the value of the stock and that saves a lot of money but there is one thing you should know.

Amazon did not buy their stocks and give that to their employee but the produce new stocks and give that to the employee like Bank produce the currency.

This might decrease the price of one share of the shareholder but due to the huge growth of Amazon, it did not affect much.

This is a very effective strategy amazon used and it saves a Billion dollar by paying its employees in shares.

Why other companies can’t do this?

The reason is Jeff Bezos, other companies buy the shares of the company and give it to their employee which increases the value of the stock but it does not affect much as there is the same number of stocks in the market.

Jeff Bezos just skip the part of buying stocks he just created it and he is so confident in his company that it will grow and they will not have any in future.