Amazon’s Global Tax Dodge
Climate change activists protest outside an Amazon distribution center in Tilbury, east of London, on November 26, 2021. [Ben Stansall / AFP]
If you think Amazon behaves badly in the U.S., I’ve got disappointing news for you – it’s definitely not better anywhere else.
According to a new report, the corporate giant has avoided billions of dollars in taxes through the aggressive pursuit of economic development subsidies and playing municipalities off each other around the world.
While exact numbers were, in some cases, impossible to find, researchers found that the company consistently worked the numbers so as to pay as little tax as possible in its host countries. This, they wrote, aligns with “the company’s miserly, numbers-obsessed culture, which pervades its relationships with workers, third-party vendors, suppliers and customers.”
I spoke with Kenneth Thomas, the lead author of the report and a fellow at Good Jobs First, an organization that promotes corporate and government accountability, and Arlene Martínez, the deputy executive director at Good Jobs First, about Amazon’s games.
(This interview has been condensed and edited for clarity.)
Tell me about the major findings of this report.
KT: Certainly. We found that Amazon has received over $4.7 billion in tax subsidies worldwide. Unfortunately, that's likely a big underestimate, because there were lots of places where we couldn't get any information at all. Maybe the most surprising thing for me while researching this was learning just how secretive Amazon has been overseas.
What are the origins of Amazon's "tax break" office?
KT: They established the tax break office after they introduced the Amazon Prime model. That started with a promise of two-day delivery, then one-day delivery. Having fast delivery means they need to have warehouses near their customers. The subsidies office will find site options by looking at various factors: area wealth, warehouse facilities, proximity to airports or major roads.
Once they've located some possible sites, they'll go to the municipalities nearby and say, “You can have a warehouse, usually between 100,000 and 1,000,000 square feet, and we'd like you to give us a subsidy.” Since they usually have at least three or four location options it's easy to make them compete against each other.
AM: I'll add that the office opened on March 1, 2012. We actually launched a "10 years is enough" campaign to spotlight the worst subsidy deals.
What were the methodologies you used to figure out what the tax subsidies were? How much information was publicly available?
KT: Before 2016, projects in the EU that were bigger than 50 million euros had to publicly report their subsidies. Most of their main warehouses were built back in that era, and a few were large enough to require reporting, like one in Leipzig, Germany, and another in Fife, Scotland.
We also got some numbers from a confidential source who had access to a commercial database, others from a union in Spain, and others still from our friends at the International Budget Project in Brazil. And we talked to reporters in different places. So, a lot of different approaches.
Amazon often uses the promise of jobs to get municipalities to give them tax breaks. Does Amazon typically make good on that promise? Are there any examples that stand out of a city that has blossomed economically as a result of an Amazon facility being built there?
KT: Companies always emphasize the jobs that they're supposedly creating, but they don't say anything about what happens to competitors’ jobs. There are examples, for instance, in the automobile industry in the ‘80s and early ‘90s in the United States and Canada where for every truck and automobile assembly facility that opened with subsidies, another closed. So, promises don't really tell us the whole story.
AM: Another element is that while Amazon facilities do provide jobs, their workers also use public services. Their children go to schools. Amazon's trucks use roads. The reason why companies pay taxes is to help pay for public services: sewage, water, infrastructure, all the things that their facility needs. Subsidies mean that Amazon isn't contributing to those.
Also the jobs that are created offer lower wages than those in the warehouse industry. Warehouse jobs have long been union-protected middle-class jobs – you could make $30, $40, $50 an hour. Instead, Amazon tries to compare itself to the retail industry and brags about paying $15 an hour.
Another thing Amazon has done recently is that, when there is a clawback agreement – a clause that basically says the company has to hit a job target or the municipality will take its money back – it promises to create fewer jobs than it probably will. So, it's in the company's interest to underestimate how many jobs it will create in order to make sure that it gets its incentives. And then they can say, look at all these extra jobs we created!
And, of course, communities still have to pay for the public services Amazon isn't paying for. So, who makes up the difference? It's small businesses that don't get subsidies and residents who have to choose between paying more taxes or seeing services reduced. Usually, it's a combination of both of those things.
It sometimes seems as if the only way municipalities ever attract companies is by offering tax subsidies. Is that true?
KT: In the United States, there's no limit to [playing municipalities off each other], whereas in the EU there are rules that limit subsidies. In Western Europe, subsidies tend to be much smaller than in Eastern Europe.
AM: Also, when a company is deciding where to locate a facility it does a lot of homework. It looks at infrastructure, it looks at energy costs, water costs, whether it's near a talent pool or a major highway. That's why Amazon is probably not going to go to a lot of rural areas, right? Its facilities need to be near a dense Prime customer base and major highways. For rural communities, pitching to companies like Amazon is typically a losing proposition.
Is there anything else I didn't ask you about the report that you'd like to highlight?
KT: Well, many of the countries that we couldn't get information about are ones that are extremely well known for having fiscal wars among their constituent states or municipalities. In Brazil, they actually call these "fiscal wars," guerras fiscais. Academics there have written about subsidies, but nothing systematic. China and India are both known to use subsidies very heavily and so are the states in Mexico.
So, we know there are significant amounts of money being thrown around in these places, but we don't have a sense of how much. But data centers are usually at least $1 billion propositions. The data center that is almost completed in Hyderabad, India, was a $2.7 billion facility.
AM: I'll just add that a lot of these economic development incentive programs across the world were started to help historically disinvested communities. Giving Amazon a subsidy goes against the spirit of what the incentives were created for in the first place, which is to get businesses to consider communities that they wouldn't have otherwise considered.
There's a real inequality in a company as big as Amazon getting these subsidies given their profits, their reach and their impact on other businesses and communities. It doesn't make sense for them to be getting any subsidies at all. We've seen that abroad the same way we've seen it here.