What’s up with big companies not paying taxes? Vice recently reported that 55 well-known brands such as Nike, Zoom and FedEx “managed to book a combined total of more than $40 billion in pre-tax profits in their most recent fiscal year, while reducing their corporate income tax bill to zero.” Every time we see a headline about an industry giant skimping on their annual taxes, it feels unfair. So, why does it happen? The Government Accountability Office (GAO) released a report in 2012 about corporate income taxes saying most of these companies are either not currently profitable or can offset taxes because of losses in prior years. Here are a few other reasons why they may not dish out the cash.
This shoe company “just did it,” not paying taxes on $2.9 billion in U.S. pre-tax income last year, according to the Institute on Taxation and Economic Policy (ITEP). And they received a $109 million tax rebate. People may be suspicious, but Nike released this statement.
NIKE, Inc. is a global business with 73,000 employees and we comply with tax laws everywhere we do business. NIKE is paying significant U.S. federal, state, and local direct and indirect taxes every year. In fact, including customs duties, Nike has paid more than $9.1 billion in U.S. taxes since 2016.
Zoom reported making $672 million the fiscal year ending Jan. 31, up more than 3,000% from the year before.
The company had a $300 million tax credit from 2019 to use against future earnings. But according to CBS Moneywatch, the biggest reason for the company’s low tax burden was offering stock options to employees.
The New York Times reported that this shipping company used the CARES Act to its advantage, using its 2020 losses to reduce tax bills.
Why do companies not have to pay taxes?
Even in 2012, 70% of all active companies paid zero corporate taxes, and 20% of “profitable” companies had no tax liability. There are a few reasons why this happens. One is moving profits to offshore countries with lower tax rates. The second could be giving out stock options to employees like Zoom. Either way, many people are up in arms, wondering why they still have to pay personal taxes.