American tax officials

Chapter 312 Now I know your Achilles' heel!

"Well said!"

"Chief David is right. The IRS's job is to collect taxes. Since Amazon is suspected of tax issues, we must investigate thoroughly!"

"That's right, support Director David!!!"

Online and in front of television, David's supporters cheered.

Yes, Amazon has a huge influence, but taxation is the foundation of a country. You can't enjoy exemptions just because you have a lot of influence, can you?

If everyone were like you, Dumbasson, what would be the point of having the IRS?

This country's finances have long been bankrupt!

"Alright, next question..."

David then pointed to a reporter from KCBS.

Unlike the others who eagerly asked questions when called upon, this reporter calmly asked, "Director David, there's a rumor circulating online that Amazon hasn't paid any taxes in recent years and has even received substantial subsidies from the government. Is that true?"

"That's right, Amazon hasn't paid any taxes to the IRS in recent years, and from 2005 to 2021, they obtained a total of $13.47 billion in tax subsidies by manipulating state tax policies!"

Actually, the reporter's question was arranged by David in advance.

Because he knew very well that the best way to reverse public opinion and make Amazon a public enemy was to announce to the world that the company was extremely stingy.

Your company is so big, yet you haven't paid any taxes for so many years. No matter how reasonable your reasons are, it's still unacceptable.

"My goodness, Amazon really hasn't paid any taxes in recent years!"

"Fuck you! Not only have they never paid taxes, but they're also trying to get subsidies by manipulating state policies. This Amazon is going too far!"

"Director David must thoroughly investigate them and impose a severe penalty, making them return all the taxes they've owed over the years, with interest!"

"..."

Sure enough, David's words immediately caused an uproar online.

Although many people online have said that Amazon has not paid any taxes in recent years, this news has not been officially confirmed, so some online trolls who support Amazon can naturally try to whitewash it.

But now that David from the IRS has personally come forward to admit it, it's definitely not fake, so netizens are naturally very angry.

Even some people who originally supported Amazon began to think that Amazon's actions were somewhat unethical, and their stance on taking sides began to waver.

The lobby of the Los Angeles IRS building.

Most of the people at the scene were still caught up in the previous news and hadn't come to their senses when a sudden commotion behind them forced them to turn around and look back.

"That's... Amazon's legal department!"

Although Amazon's legal department doesn't have the same reputation as Disney's, which boasts the title of the world's strongest legal department.

However, as a giant enterprise with a market value of nearly two trillion, its legal department has appeared in public quite often, so many people at the scene recognized them.

The arrival of Amazon's legal department caused another uproar online.

Since Amazon's legal department has come here, it means that the confrontation with the IRS has officially begun!

Who will ultimately win this battle of tax audits and counter-tax audits?

This is naturally something that many people across the internet are looking forward to.

David, under the spotlight, naturally saw the arrival of Amazon's legal department, and a smile appeared on his lips.

Compared to the executives at Amazon's Los Angeles branch, these legal team members from Amazon's headquarters certainly have more insider information and dirt on the company.

If David conducts a thorough investigation of them, he will surely be able to obtain more useful information!

"Alright everyone, that concludes today's press conference!"

The purpose of this press conference was to alleviate the public pressure on the IRS, and now that this goal has clearly been achieved, David naturally stopped talking nonsense.

After stepping down, he instructed Nissen, "Bring the legal department of Dumbasson to my office."

"Understood."

David returned to his office first, and three minutes later, five members of the Amazon legal department, led by Lakluva, were brought in.

"Hello, Chief Executive Officer David. My name is Lakluva, and I am the Chief Legal Counsel of Amazon's Legal Department. This is my colleague Tomlinson, this is Wilbur, and this is..."

With Lakluva's introduction, David very kindly extended his hand and shook hands with each of them.

Lakluva opened his briefcase, took out a thick stack of documents, placed them on the table, and said, "Director David, since your IRS is launching a tax investigation against our group, we will naturally cooperate. These are our group's tax records for all regions over the past five years. You can take a closer look..."

David pretended to pick up the documents, but secretly kept glancing at Lacruy.

After a moment's examination, a slight smile began to appear on his face.

If we're talking about which department in a group has the most inside information, it's definitely the legal department.

For a group, the legal department is responsible for cleaning up messes and resolving problems.

And now, Amazon's legal department is no exception.

In his examination of Lakruva alone, he discovered a great deal of useful information.

For example, in 2017, the IRS amended the tax law and added a new item called "value impairment tax deduction", which means that companies can build warehouses and R&D centers and use the completed factories, equipment and so on to deduct taxes.

As soon as this policy was introduced, Amazon immediately built a large number of factories and purchased a large amount of equipment in various states and regions across the country. This move brought them a rich return, namely a 40% tax reduction.

However, the policy of deducting value impairment from taxes is conditional.

For example, if you build a factory in Long Beach, Los Angeles, then you must comply with local policies and requirements to boost local employment and the economy.

But then again, no matter how big or profitable Amazon becomes, the United States is so vast, with many remote and impoverished areas. It's impossible for every factory there to meet local targets.

So how did Amazon do it?

They are very cunning. Some factories in certain areas are not up to standard, so they manipulate the accounts. For example, the government in Los Angeles sets a target of 1 million, and as a major international city, it is normal for Los Angeles to have an oversupply.

If the surplus exceeds 1000 million, 2000 million or more, they will transfer the excess funds to factories in places like Philadelphia that do not meet the targets. This way, they can meet the local government's targets and thus obtain the required tax credit.

If David wanted to make a fuss, it would be very simple; he could send inspectors to conduct undercover investigations at Amazon factories across the country.

As mentioned before, tax deductions can be made by constructing warehouses, R&D centers, factories, equipment, and other facilities.

With so many factories, R&D centers, and warehouses across the country, many of the equipment, facilities, R&D centers, and warehouses in those unprofitable factories must be substandard.

If he simply sends someone to investigate and record the details, he can use that as grounds to sue Amazon for suspected tax fraud.

However, while Amazon's use of impairment tax deductions is clever, it's not its most egregious tax avoidance method. Its most egregious method is the use of "operating loss deductions".

In the United States, operating losses can be carried forward for up to fifteen years.

According to information obtained from the Lakruva group, Yamasun has taken this rule to its extreme.

For many years, they have not actively sought to make a profit, but instead used the money they earned to expand their business, investing in areas such as cloud computing, artificial intelligence, and infrastructure, thus deliberately operating at a loss.

In the 20 years since its founding in 1995, Amazon has lost billions of dollars, including $30 billion in the first eight years after its IPO.

The most recent loss was in 2014, when it amounted to $2.41 million.

According to the data, Amazon currently has $14 billion in federal tax credits on its books, which it can use at will, which is disgusting.

As for how Amazon received government subsidies, David thought about it and also felt there was something to explore.

To obtain government subsidies, one must meet certain targets set by each state. It seems that Amazon is still using the same old trick of tax deduction for these targets. He needs to send someone to investigate this thoroughly, because he believes that Amazon is definitely also engaging in irregularities in this regard.

In the following time, David turned his attention from Lacruy to the other four members of the Amazon legal department.

As he examined these people more closely, his gaze gradually brightened, because he seemed to have gleaned a very important piece of information from them.

For the past 20 years, Amazon's business has existed under very strange circumstances, yet few people have questioned it.

On the surface, Amazon is the lowest-priced option in the e-commerce market, and it offers "free shipping" to over 1 million Amazon members, but it charges an annual membership fee of $139. However, this membership fee is clearly far from enough to cover the costs of its logistics department.

In 2021 alone, Amazon's logistics costs reached $850 billion.

In terms of actual value, each Amazon customer needs to pay at least $1000 in membership fees to break even.

But Amazon's membership fee for free shipping is only $139 per year, which means Amazon has to subsidize hundreds of billions of dollars. Where does this money come from?

In other words, how does Amazon manage to keep costs down, offer free shipping, and still make a profit?

In reality, Amazon has implemented a series of clever plans to incorporate costs into the price of goods as a "hidden tax," meaning that "consumers" are paying for free shipping.

Consumers are unaware of this, and Amazon doesn't intend for them to know either; of course, they don't want the IRS to know either.

Because if the IRS finds out that Amazon is charging users hidden taxes and they don't have a reasonable explanation, they can be charged with tax evasion.

But this is not the most important.

Most importantly, Amazon's strategy was to use Prime to build, expand, and strengthen barriers to entry, one result of which is that Amazon now has an overwhelming monopoly share of online shoppers.

Once it gained a monopoly, Amazon lowered prices by charging fees to third-party sellers. As a third-party seller, you have to pay a fee to list your products on Amazon, use Amazon's warehousing services (i.e., Amazon Delivery), and Google services.

If you don't pay, you won't be able to access the website locations that consumers click on.

Therefore, online shoppers may not be the real "customers," but rather the "products" that Amazon provides to third-party sellers.

Third-party sellers must pay Amazon's requirements and related fees, or they will lose market access.

Currently, the total fees collected by Amazon from third-party sellers have grown to nearly 50% of its revenue. Amazon uses these funds (estimated at $1230 billion last year) to pay for all the services bundled with Prime, including "free" shipping, video services, music services, Twitch, and more.

These third-party sellers, in turn, raise prices for consumers and then remit the money back to Amazon in the form of fees. Strictly speaking, this not only involves tax evasion, but could even be classified as money laundering in more serious cases.

"Sunny Sun ...

Through his examination of the people in Amazon's legal department, David can now say that he knows the group's Achilles' heel; all that's left is to obtain concrete evidence!

"What's wrong, Chief David?"

Seeing David's mischievous grin, Lakluva asked in bewilderment.

David put down the documents in his hand and replied, "It's nothing. I've already looked at the documents, and on the surface, there doesn't seem to be any major problem. However, we still need to investigate the specifics."

Lakluva and the others exchanged glances, then the legal department member named Wilbur probed indirectly, "Director David, all of our group's tax data for the past few years is here. There shouldn't be anything to investigate, right? Is there any other question?"

"Yes, Director David, if you have any further questions, please feel free to ask. We will answer them for you on the spot, without troubling the IRS's manpower and resources."

Another member chimed in, echoing the sentiment.

"Whether there's a problem or not isn't up to you to decide, it's up to me. Go back now, I'll let you know as soon as there's a result!"

"Well... okay."

Having said all that, what else could the five of them say? After exchanging glances, they could only stand up in unison and walk out of the office.

(End of this chapter)