Chapter 616: Chapter 310: Now I Know Your Achilles’ Heel!_2
Because the legal departnt for a corporation is essentially responsible for wiping butts and solving problems.
And now, the legal departnt at Amazon was no exception.
Just by scrutinizing Lakruwa, he had discovered a wealth of useful information.
For example, in 2017, the IRS’s newly revised tax code added a “deprecation tax shield,” aning companies could build warehouses and research centers and use the constructed factories and equipnt, among other things, to offset taxes.
As soon as this policy was announced, Amazon imdiately started building a large number of factories across various states nationwide and purchasing a massive amount of equipnt, a move that brought them rich rewards, the most notable of which was a 40 percentage point tax depreciation.
However, the depreciation tax shield policy was conditional.
For instance, if you built a factory in the Long Beach District of Los Angeles, you had to drive local employnt and economic circumstances according to local policy requirents.
But on the other hand, no matter how big Amazon beca and how much money it made, Arica was so vast with many impoverished and remote areas, it was impossible for every factory to et local targets.
So, how did Amazon manage it?
They were very cunning. For places where factories did not et standards, they would use creative accounting. For example, if the governnt of Los Angeles set a target of 100 million US Dollars, and as an international tropolis, overperformance was quite normal in Los Angeles.
And if they exceeded by 10 or 20 million or even more, they would transfer these excess funds to factories in places like Philadelphia that did not et their targets, thus fulfilling the local governnt’s criteria and qualifying for the depreciation tax shield.
If David wanted to make an issue of it, it would be quite simple; he could send an Inspector to perform surprise checks on Amazon’s factories across the country.
As ntioned before, tax offsetting could be achieved by constructing and expanding warehouses, research centers, factories, equipnt, etc.
With so many unprofitable factories, research centers, and warehouses nationwide, there were definitely many facilities within Amazon that failed to et standards.
And all he needed to do was to have soone gather and record this information to then accuse Amazon of suspected tax fraud.
But returning to the point, although Amazon played the tax depreciation ga cleverly, it was not their most disgusting thod of tax evasion—their worst was the ‘operating loss carryforward’ tactic.
In Arica, operating loss carryforwards can extend up to fifteen years.
The data obtained from the group including Lakruwa revealed that Amazon had exploited this rule to the fullest.
For many years they consistently reported losses, reinvesting profits into expanding their business and investnts in cloud computing, artificial intelligence, infrastructure, deliberately incurring business losses.
In the 20 years since its establishnt in 1995, Amazon had lost several billion US Dollars, with a loss of 3 billion US Dollars in just the first eight years after going public.
The most recent loss occurred in 2014, a deficit of 241 million US Dollars.
And according to the information, Amazon still had 1.4 billion US Dollars of federal tax credits available to use at their discretion, which was quite disgustin.
As for how Amazon obtained governnt subsidies, upon reflection, David also felt there was an angle to explore there.
To qualify for governnt subsidies, you had to et certain criteria set by the states, and it seed Amazon had applied the sa tactics they employed for the depreciation tax shield. He needed to send soone to investigate properly because he believed Amazon was definitely engaging in irregular practices in this area too.
In the following period, David shifted his attention from Lakruwa to the other four mbers of the Amazon Legal Departnt.
And as he delved deeper into these individuals, his gaze began to brighten, for he seed to piece together a very important piece of information from them.
For the past 20 years, Amazon’s operations had existed under a very peculiar premise, yet few had questioned it.
On the surface, Amazon appears to be the lowest-priced option in the e-comrce market, and it provides “free shipping” service for over 100 million Amazon mbers, but mbers are charged a fee of $139 US Dollars per year. However, this mbership fee clearly falls short of covering the cost of its logistics departnt.
Take the year 2021 for example, Amazon’s logistics costs reached 85 billion US Dollars.
And by actual value, each Amazon custor would have to pay at least 1000 US Dollars in mbership fees to break even.
But Amazon’s free shipping mbership fee is only $139 US Dollars a year, which ans Amazon is subsidizing tens of billions of US Dollars, so where does this money co from?
In other words, how does Amazon maintain its lowest cost with free shipping while still making money?
In fact, Amazon has implented a series of cunning plans, incorporating costs into the price of goods as a “hidden tax,” which is to say “consurs” are actually paying for the free shipping.
But consurs don’t know this, and Amazon certainly doesn’t plan to let them know, and of course, they don’t want the IRS to know either.
Because if the IRS were to find out Amazon is charging users a hidden tax, without a reasonable explanation, they could be accused of tax evasion.
But this is not the most important part.
The most critical aspect is that Amazon’s strategy is to use Pri to establish, expand, and strengthen barriers to entry, which has resulted in Amazon now having an overwhelming monopoly share over online shoppers.
Once monopoly power is obtained, Amazon suppresses prices by charging third-party sellers a fee to list on Amazon, use Amazon’s warehousing services, aka Amazon fulfillnt services, and advertising services.
If you don’t pay, you can’t get into the website position that consurs click on.
So in actuality, online shoppers might not really be the “custor,” but rather the “product” that Amazon offers to third-party sellers.
As for third-party sellers, they must pay Amazon the demanded fees and related costs, or they will lose their market access rights.
At present, the total fees Amazon collects from third-party sellers amount to nearly 50% of its revenue. Amazon uses these funds (last year’s total estimated at 123 billion US Dollars) to pay for all of the bundled Pri services, including “free” shipping, video services, music services, Twitch, and more.
In turn, these third-party sellers raise prices for consurs and then send the money back to Amazon in the form of fees. Strictly speaking, this is not only suspected of tax evasion but in serious cases, it could even be classified as money laundering.
“Amazon, oh Amazon, you’ve really got sothing coming for you now!”
After scrutinizing the Amazon Legal Departnt, Director David could now say he knows the company’s Achilles’ heel, he just lacked tangible evidence.
“What’s up, Director David?”
Seeing David’s sly grin, Lakruwa also asked in confusion.
David put down the docunt in his hand and replied, “It’s nothing, I’ve looked over the docunt, and there doesn’t seem to be any major issues on the surface, but we’ll need to investigate further.”
Lakruwa and the others exchanged glances, then a mber of the legal departnt nad Welber hinted, “Director David, all our group’s tax data from the past few years is here, there shouldn’t be anything left to investigate, is there? Any doubts?”
“Yes, Director David, if you have any doubts, just speak up, we’ll answer them right here and now, there’s no need to trouble the IRS’s manpower and resources.”
Another mber also spoke up in agreent.
“Whether there’s an issue or not is not for you to determine, but for to decide. Go back, and I will notify you as soon as there are any results!”
“Well… okay then.”
With that said, what else could the five of them say? After exchanging glances, they all stood up in unison and left the office.
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