AWS, with $626 million in federal contracts, pays ‘negligible’ tax: report

Amazon’s cloud business reported $600 million in Australian income but only paid $16 million in tax in the 2020 financial year, a global tax accountability organization calling for greater transparency around its local operations.

A joint report by the Center for International Corporate Tax Accountability and Research (CICTAR) and TaxWatch, released Monday, examines AWS’s importance to Amazon’s global business and its practice of “aggressive tax avoidance.”

The report looks at Australia as a case study in this area, with AWS landing $626 million in federal government contracts but paying “negligible” tax in the country.

An Amazon spokesperson said the company “pays all applicable taxes” in Australia.

CICTAR senior analyst Jason Ward said Amazon shouldn’t be rewarded with Commonwealth contracts and the federal government should support local businesses instead.

“If there are qualified Australian companies that can do the job, why not give it to them and boost jobs and taxes for domestic industry rather than awarding massive contracts to companies like Amazon, which has a track record. global and national taxation? avoidance,” Ward told InnovationAus.com.

“The government has this huge buying power and it should use it to leverage responsible behavior and greater transparency across the industry.”

CICTAR is backing a proposal at an Amazon shareholder meeting this week, urging the company to publicly report on its tax payments and earnings in all countries where it operates. This would help better determine what work AWS does in Australia and whether it pays adequate taxes.

AWS Australia reported total revenue of $600 million in fiscal 2020, with taxable income of $55 million and paying $16 million in corporate tax, according to tax data from the ATO.

Since 2017-18, AWS Australia’s total revenue has tripled, but the amount of tax the company pays has only increased from $7 million to $16 million, according to the CICTAR report.

AWS Australia has entered into a lucrative whole-of-government agreement with the Federal Government, worth $390 million and running until 2025. The company has also won a number of contracts with government departments and agencies, including to host data from the controversial COVIDSafe contact tracing app. .

Several of the Australian government’s contracts with AWS are held directly with Delaware-based Amazon, rather than its local subsidiaries. Ward said that was previously the case with all AWS contracts, but now it’s more mixed.

“Assuming a contract is signed with the Delaware entity, all contractor payments immediately go overseas and a small portion goes to the Australian entity,” Ward said.

“Revenues and profits are shifted offshore from the start. There is such an ability for a company like Amazon to make payments and basically withdraw money overseas.

AWS’ original Australian whole-of-government agreement, signed in 2019, was with the Seattle-based parent company rather than its local subsidiary. When that deal was extended earlier this year, it was transferred to its Australian subsidiary.

An Amazon spokesperson defended the company’s tax record globally.

“Amazon pays all applicable taxes in Australia and in all countries in which we operate,” the spokesperson told InnovationAus.com.

“Australian government agencies are saving costs from the day of sign-up, due to the economies of scale achieved through the global supply agreement and also supporting a community of small IT businesses across Australia, who offer products and services that complement and help customers take full advantage of AWS.

AWS controls more than a third of the global cloud computing market and is the most profitable market segment for tech giant Amazon. While AWS only accounts for 13% of Amazon’s revenue, it accounts for 74% of its operating profit.

AWS has grown rapidly in recent years, especially in public sectors around the world.

“Despite raising public funds through large and rapidly growing government IT contracts, Amazon continues to despise paying its fair share of taxes. Amazon uses government contracts and subsidies to expand its empire and stifle competition , but it avoids tax liability on the profits it makes,” Ward said.

“The lower taxes paid by Amazon means the responsibility for funding essential public services is shifted to its hundreds of millions of customers and its growing global workforce.”

Amazon is headquartered in Washington state but incorporated in Delaware and has a market capitalization of $1.6 trillion. In 2021, AWS had net revenue of $62 billion, contributing nearly 75% of Amazon’s overall profits.

In Australia, AWS secured a $39 million government-wide procurement deal with the federal government through the Digital Transformation Agency in 2019. That deal has now grown 10x to $390 million in three years, and will last until 2025.

AWS Australia also received $31 million from the tax office and over $10 million from the employment department.

The company also received just under $710,000 to provide cloud hosting for the COVIDSafe app’s contact tracing data in 2020, raising concerns about data sovereignty.

More than $660 million of AWS Australia’s revenue came from related party sales and another $24 million from related party sublease payments, and some of that is “questionable,” the report says. .

One of the largest of these expenses was for “cloud service fees” of more than $223 million and $55 million for intangible assets.

“These types of large related party transactions, usually offshore, are common indicators of aggressive tax avoidance by multinationals,” the report said.

The report calls for greater transparency around how Amazon and other tech giants operate in Australia.

“It is impossible to decipher from the Australian accounts what levels of service provided in Australia may have been paid directly to Amazon’s offshore entities with only part of the payment going to the Australian entity,” he said.

“Although there is enough evidence to raise many serious doubts and questions, there is not enough evidence to properly analyze the complex multinational structure of Amazon’s global business and its tax obligations in specific jurisdictions.

“If governments are to continue to support and rely on AWS for the delivery of increasingly ubiquitous cloud computing services, it is crucial that these governments demand transparency.

A CICTAR report on another major government contractor last week found consultancy giant McKinsey was paying a ‘negligible’ tax in Australia despite securing more than $145 million in federal government contracts over the past three years and reporting total revenue of $850 million.

Do you know more? Contact James Riley by email.


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