Rather than being outraged at the headline, what are the actual details? Why were they able to pay no taxes? Was it due to carried losses or something like that?
Anyone mad at a company for not pay taxes is misdirecting their anger. Companies follow the law. If you don't like the law elect different politicians. Don't get mad at companies that follow the law.
It's not that simple. Companies lobby to keep, even coerce, laws that benefit them and allow these sorts of things to happen. What is the common person, or collection of persons, supposed to do when they are against that kind of force? I believe one way is to actually be involved in politics and get into the seats that govern and make the laws. But it's easier said than done.
Netflix hasn't, to my knowledge, even filed their 2018 annual yet (or their Q4 2018), so I'm not sure what they're even basing their numbers on. But they admit elsewhere that Netflix paid taxes most of the preceding years, averaging out around 13.5%. In the end their tax lawyers do exactly what tax lawyers do, and unless they're breaking the law so be it.
As an aside, it's rich that it's always Americans complaining about companies paying low American taxes on billions that they make overseas. Netflix is more international than American now (2/3rds of their subscribers are not Americans), yet they are especially adept at avoiding taxes everywhere else. In the UK they have repeatedly paid $0 because they claim to be a Netherlands operation there, etc. In Canada every single competitor has to charge a sales tax of 13% (and consumers weigh the total cost, so if applied it would put downward pressure on Netflix's prices), but Netflix charges none.
In any case, corporate tax rates are often much ado about nothing because in the end that money ends up in various other tax brackets. It becomes a capital gain, or a dividend, or some other form that often gets taxed at the personal level.
If I spend a few million to get some lawyers to work out a legal loophole that means I can murder someone and get away with it that wouldn't make it OK to actually do it.
The same applies to tax avoidance. It might be legal but it's still wrong.
> Anyone mad at a company for not pay taxes is misdirecting their anger. Companies follow the law. If you don't like the law elect different politicians. Don't get mad at companies that follow the law.
Agreed. Are they supposed to purposely waste their shareholders money to take a moral stance against tax avoidance? When it's something that any corporation can do, then they have no choice but to do it to stay competitive. Regulators are the only ones in a position to stop it.
I think citing people "mad at the company" is a straw man. I'm sure someone is, but most people are angry at the system.
It's really quite simple. My marginal tax rate is probably 28% or 32% or something. My effective federal rate is, I'm sure, sub-20%, but every additional dollar I make is taxed at that top rate.
I don't need billionaires to be taxed at 70% or have a wealth tax. I just want people to pay the tax they're supposed to pay. I don't want loopholes where someone made $100m through cattle future derivatives that have a carve-out when implemented in cities in farm states with populations of under 10,000, so they pay 0%.
Same for corporations. Fine, you write of x,y,z. But at some point if you're making more money than ever you shouldn't be paying less tax than ever, let alone $0. The solution, in my mind, is not to soak them for being successful. The solution is to find each and every loophole they're exploiting, and tear them the hell up.
>"If you don't like the law elect different politicians."
What an incredibly naive statement that is. Of the 11K registered lobbyists in Washington, DC more than half of them 6200 of them worked on tax related issues in 2017. 4,200 of them specifically on tax reform[1][2][3]
Put another way that is 11 lobbyists for every individual member of congress. The lobbyists are the ones shaping the tax code. Further tax reform is a generational thing, the last time it was taken up was under Reagan in 1986. Simply "electing different politicians" will accomplish nothing.
>"Anyone mad at a company for not pay taxes is misdirecting their anger. Companies follow the law."
No, one of the reasons that the US is great place to start a business is because there's a mature legal system, a stable government, and infrastructure and those things take money to run. If the country provides an environment that allowed a Netflix to start up and prosper then why shouldn't that company be expected to help pay for all those things? Both individual and corporations should share the burden of that. So no the anger is not "misdirected" at all when it's directed at entity who's shirking their responsibility. Just because something is legal does not necessarily make it right.
Netflix can afford a few senators if they want. Instead they just lobby existing legislators and put bills on their desks.
Corporations are not just "following the law", they're writing it.
>If you don't like the law elect different politicians
How? Government officials are far more beholden to corporations like netflix than they are to people like us. If push comes to shove then corporations can spend a trivial amount of money to crack the consensus among the group of people pushing for change.
It’s pretty simple. I’m surprised more people don’t know about this.
it’s called net operating loss. when you’ve lost money over the last ten years you can deduct those losses from your gains and only pay taxes on the difference.
Makes senses, right? A business needs to cover the losses before there is really a “profit” to pay taxes on. But this ends up incentivizing losing money, and makes the silicon valley business model of raising a ton of money and running at a loss to try and dominate the market a lot more profitable
I'm guessing a lot of people on here will be shocked, if you aren't shocked already, by their tax returns this year. The new $10k cap on SALT (state and local tax) deductions, which was previously unlimited, will really hurt a lot of people living in high tax states like CA and NY/NJ, especially those who have even a modest property in those states.
While that on principal is true, as an average citizen, digging into whether or not Netflix actually did something illegal is logistically impossible (not to mention requires skill very few outside of private industry-tax-optimization has).
Looking at a successful company like Netflix, boasting massive profits and growing fast while paying no taxes is a reasonable proxy for something not being right.
Either Netflix is doing something wrong (and the public needs to take action) or the system is broken (and the public needs to take action).
In either case, anger and discussion is in its place
>Companies follow the law. If you don't like the law elect different politicians. Don't get mad at companies that follow the law.
If a company is dumping waste into a lake and it is not against the law to do so, it is then wrong to get mad at the company? What if this is the behavior of all companies in the area? They all need to dump waste in the lake in order to remain competitive.
Is it wrong to become outraged at the companies for their behavior? They should not be held accountable?
I love that in arguments like these there's always someone who switches the blame to the consumer.
There are lots of things that are unwritten rules in life. The consumer is expected to follow them, why would it be any different for corporations? Not paying you fair contribution to society might not be illegal, but it sure sounds immoral to me.
I think it's about time everyone stops shrugging this shit away.
I'm not sure the point of these articles is to make people mad at the companies. Nobody expects a large public company to break the law evading taxes because they have to release their numbers, so what they're doing must be legal.
The best way to highlight loopholes and broken parts of the tax system is to point out when they're being used and taken advantage of.
From what I recall of a report in 2017, the main ways Netflix was able to avoid tax was due to Research Tax Credits and, mostly, due to the way stock options are treated. (I am not a tax lawyer, so go easy) The gist was that companies can claim a discount on stock options exercised by employees.
More than that, public companies have obligation to maximise profits for their shareholders as long as they are following the letter of law. There is not much choice here, they can't pay even if they wanted unless they can show this is somehow in shareholders' best interest.
I think people are outraged because the laws themselves are unfair and special tax breaks are doled out.
> If you don't like the law elect different politicians.
In our form of government it's possible for a presidential candidate with fewer total votes to win (Trump & Bush). If we had a popular vote for President this argument would make more sense.
Also, on a ballot we're often given 2 (maybe 3) choices for representation. These representatives often need to raise money and they raise money from the companies and wealthy individuals that benefit from the tax breaks and exemptions.
Unfortunately, it's a cycle of influence (aka - light bribery) that keeps these unequal laws going.
A flat tax without exemptions seems like the fair and simple way to address this, but there's so much money to be made by making taxes complicated that it's hard to imagine well funded politicians actually passing something like that.
> If you don't like the law elect different politicians.
lol, you are being hopeful. (for example, I voted for Obama because he promised to repeal the "PATRIOT" Act and instead of doing that, he made it worst)
(But I agree with you that the laws are the problem...)
Yes. Companies follow the law. But companies also write the laws. Pretty much every tax loophole/shelter/etc ( international or domestic ) was created at the behest of companies and their hordes of lobbyists and lawyers.
Slave owners followed the law also. Kings followed the law.
If we can't get mad at companies for following the law, can we at least be mad at them for creating these laws?
I'm sure Netflix paid tons in employer contributions to employee income taxes, social security taxes, etc. They probably paid a bunch in sales taxes where they made purchases. Property taxes for data centers, office buildings, etc. So there are many more taxes that everyone pays beyond the income tax.
As others have pointed out, the tax code is immensely complex, but you probably don't need a deep explanation for a $0 income tax bill: previous years' financial performance can carry over into the current year.
As someone once told me: with complexity comes opportunity. Simplifying the tax code, regulations, and laws removes the opportunity for well-funded operations to exploit the existing complexity.
There can be a huge difference between "income tax expense", which will be the numerator for any headline income tax rate and "income taxes paid".
For Netflix this is true for 2018. In fact they paid $131 million for income taxes, which, as a percent of their income is way higher than "$0" which the original article claims in its.
Also, the article makes no mention of R&D tax credits, which saved NFLX $141 million in state and federal income tax credits (the second biggest component).
It would not have been difficult to find this in NFLX's 10-K.
Netflix says the Tax Cuts and Jobs Act of 2017 _cost_ them an additional $79 million
Edit: For those unaware, in Chrome, you can type "cache:" before the URL in the address bar (not with the quotes of course) to get a cached version from Google.
I assume this has something to do with the massive amount of debt that fuels Netflix original programming. That being said, our entire tax system is regressive, for both businesses and individuals, when it comes to dealing with it's complexity.
A small or medium size business does not have the legal or accounting capability to navigate the tax code as successfully as a company like Netflix can. Similarly, even a high income individual can't stretch the tax code like billionaires can. On net it seems like the lower and middle income players subsidize the high income players both in business and personal taxes.
They made 1.2 billion in 2018 income before taxes compared to 485 million last year.
The corporate tax rate was brought down from 35% to 21% in 2018.
So they should have paid 257 million in Federal, 33.6 in State and 63 million in foreign taxes
With the Federal and California R&D tax credits (140.7 million) and tax benefits on stock based compensation (191 million) and other odds and ends they brought it down to 15 million for an effective 1% tax rate.
"In 2018, the difference between our 1% effective tax rate and the Federal statutory rate of 21% was primarily due to the recognition of excess tax benefits of stock-based compensation, Federal and California research and development credits (“R&D”), and updated adjustments related to U.S. tax reform as a result of the U.S. federal tax return filing, partially offset by state taxes, foreign taxes, non-deductible expenses and the international provisions from the U.S. tax reform enacted in December 2017."
Netflix has also deferred tax assets - easiest to think of as tax prepaid but could also include taxes paid to foreign countries, losses from previous years, etc.) of 689 million. So they counted the taxes against it.
In the cash flow stateemnt the supplemental disclosure is 131,069 for Income taxes paid. So there was actual cash tax payments made.
Netflix has, in fact, paid $100 million in income taxes in 4 of the last 5 years and $80 million in the 5th. They just paid most of last year’s outside the US, to the tune of $130 million. For more details, see annual report.
This seems to be a good place for my own take on taxes...
1. Abolish corporate income tax.
2. Tax capital gains (and dividends) as ordinary income.
The corporate income tax is absurd. It doesn't generate a lot of revenue, but it has a bazillion highly specific loopholes, supporting a whole cottage industry of lobbyists and accountants. It's an unfair advantage to large corporations that can afford the tax-cutting power (like Netflix).
The capital gains rate is the source of our most gruesome wealth inequality. It's absurd that Mitt Romney pays half my effective tax rate on 200 times my income. The justification for low capital gains rates is "double taxation" due to corporate income tax. Abolishing corporate income tax eliminates that.
If the rich don't want to pay taxes, then they need to not liquify their investments. If corporations don't want to pay taxes, they need to reinvest their profits in growth.
(read the cached version) I'd like to see figures on how much of that $22 million was re-invested in the workforce and economies which surrounded Netflix's productions. Those figures would be key in any personal judgement call I'd make on the report.
Can someone explain to me why businesses pay any tax at all. It makes no sense to me that we want to restrict the flow of money through a business. Maybe we could tax cash holdings of a company, but why would you tax any income that ultimately goes to expansion, shareholders, employees?
People see these "tax evading" corporations as so evil, but why? Do they really even remotely understand what is going on? I suspect they don't. Or maybe I don't get it.
Edit: Maybe what I fail to realize is that income for a company is essentially what I'm thinking of as cash holdings, anything else would be an expense that would be deductible?
I wish the post went into detail about how it is Netflix paid no taxes in 2018. It's not like a company that size just decides to not pay any tax--they are following a specific strategy to accomplish that, and not discussing that strategy in favor of the "big bad corporation" trope makes for an insubstantial blog post.
Just because a corporation doesnt pay any corporate tax, that doesnt mean the Government doesnt get paid their fair share when their employees pay an income tax on the salary thats paid to them by the corporation.
Having a 35% corporate tax AND a 35% income tax on all earners who make more than 120k/year, means the Government would essentially recieve %70 of all of Netflix's revenues, assuming inbound revenue and outbound expenditures are maintained at a 1:1 rate of growth.
Netflix doesn't pay (nor should they be paying any) taxes right now because they invest heavily in producing original content using borrowed money. When that original content flops they still have to pay back all that money they lost plus interest.
Netflix might have made a ton of profit this year but im pretty sure they are still heavily in debted (in the billions last i checked). To tax netflix at 35% now that they are finally starting to see a return on their investment would only cripple the corporation from maintaining their upwards momentum of growth.
You only want to start taxing a corporation when they are completely self reliant on their own revenue when funding their day to day operations and investments towards R&D.
There is a lot of talk about increasing taxes on wealthy companies & individuals in the US as of late again. Whether that's a good or bad strategy I'm unsure.
Either way it seems that well paid accountants are easily winning the arms race on how to avoid taxes. I'm curious if a government can actually win that race.
The “profit” Netflix is reporting on the one hand is an entirely different number than the taxable net income that Netflix reports to the IRS.
Take a look at Netflix’s free cash flow for a better understanding of what a SaaS-type business experiencing hyper-growth looks like.
Their customer acquisition cost in this case is spending on content. That content will be consumed (and hence “paid for”) by subscribers primarily over the next 1-3 years.
So as they ramp up their subscriber count, and likewise ramp up their production spending, they are constantly outspending “Year 0” (today) to create content which will earn back that money, and then some, over the next 1-3 years.
Netflix is able to report financial metrics which show “Net Income” I think (and I haven’t dug into their statements to confirm this) because they spread/amortize the cost of licensing the content over the timeframes they expect it to be used.
Whereas for tax purposes, the money they are spending on content can be deducted fully in the year it is spent against income for that year.
As long as Netflix grows the amount they spend on content each year, they will have negative free cash flow and pay little to no taxes.
If they grow their subscribe base at 20-30% YoY it means they can spend 20-30% more on content this year than they would typically be able to spend based on their current subscription revenue. E.g. if they spend 60% of revenue on content, and content is consumed over 3 years, they can spend closer to 80% of this year’s subscription revenue on content, and in theory over the next 3 years they earn it back. By doing this, as far as the IRS is concerned their cash flow and net income is truly negative.
Eventually a company will flatten out its growth curve and the weight of servicing all that debt will require spending on content to fall below the subscriber revenue, and in the long run cash flow must be positive for a company to survive.
Keep in mind income taxes are just one for of tax revenue that is generated by a company like Netflix. There is a tremendous amount of tax revenue generated overall by Netflix, everything from taxes on the internet connectivity people are buying to use Netflix, to sales taxes and employment taxes.
So they found/caught/exploited an opportunity to pay no taxes this year. Is it a permanent thing thanks to new tax laws? It's pretty easy to see that they have paid millions in income tax in previous years: https://www.marketwatch.com/investing/stock/nflx/financials
Paid $0 in taxes always seems a bit disingenuous to me, since they pay labor and equipment costs that are all indirectly taxed. These companies may not pay taxes in the ways we would like them to, or naively expect them to, but the government still ends up with a lot of money in their coffers on account of them.
[+] [-] driverdan|7 years ago|reply
Anyone mad at a company for not pay taxes is misdirecting their anger. Companies follow the law. If you don't like the law elect different politicians. Don't get mad at companies that follow the law.
[+] [-] otachack|7 years ago|reply
[+] [-] endorphone|7 years ago|reply
As an aside, it's rich that it's always Americans complaining about companies paying low American taxes on billions that they make overseas. Netflix is more international than American now (2/3rds of their subscribers are not Americans), yet they are especially adept at avoiding taxes everywhere else. In the UK they have repeatedly paid $0 because they claim to be a Netherlands operation there, etc. In Canada every single competitor has to charge a sales tax of 13% (and consumers weigh the total cost, so if applied it would put downward pressure on Netflix's prices), but Netflix charges none.
In any case, corporate tax rates are often much ado about nothing because in the end that money ends up in various other tax brackets. It becomes a capital gain, or a dividend, or some other form that often gets taxed at the personal level.
[+] [-] onion2k|7 years ago|reply
The same applies to tax avoidance. It might be legal but it's still wrong.
[+] [-] shawnz|7 years ago|reply
Agreed. Are they supposed to purposely waste their shareholders money to take a moral stance against tax avoidance? When it's something that any corporation can do, then they have no choice but to do it to stay competitive. Regulators are the only ones in a position to stop it.
[+] [-] jjallen|7 years ago|reply
#1: "Excess tax benefits on stock-based compensation": (191,323) #2: "Federal and California R&D tax credits": (140,749)
https://www.sec.gov/Archives/edgar/data/1065280/000106528019...
[+] [-] rconti|7 years ago|reply
I think citing people "mad at the company" is a straw man. I'm sure someone is, but most people are angry at the system.
It's really quite simple. My marginal tax rate is probably 28% or 32% or something. My effective federal rate is, I'm sure, sub-20%, but every additional dollar I make is taxed at that top rate.
I don't need billionaires to be taxed at 70% or have a wealth tax. I just want people to pay the tax they're supposed to pay. I don't want loopholes where someone made $100m through cattle future derivatives that have a carve-out when implemented in cities in farm states with populations of under 10,000, so they pay 0%.
Same for corporations. Fine, you write of x,y,z. But at some point if you're making more money than ever you shouldn't be paying less tax than ever, let alone $0. The solution, in my mind, is not to soak them for being successful. The solution is to find each and every loophole they're exploiting, and tear them the hell up.
[+] [-] bogomipz|7 years ago|reply
What an incredibly naive statement that is. Of the 11K registered lobbyists in Washington, DC more than half of them 6200 of them worked on tax related issues in 2017. 4,200 of them specifically on tax reform[1][2][3] Put another way that is 11 lobbyists for every individual member of congress. The lobbyists are the ones shaping the tax code. Further tax reform is a generational thing, the last time it was taken up was under Reagan in 1986. Simply "electing different politicians" will accomplish nothing.
>"Anyone mad at a company for not pay taxes is misdirecting their anger. Companies follow the law."
No, one of the reasons that the US is great place to start a business is because there's a mature legal system, a stable government, and infrastructure and those things take money to run. If the country provides an environment that allowed a Netflix to start up and prosper then why shouldn't that company be expected to help pay for all those things? Both individual and corporations should share the burden of that. So no the anger is not "misdirected" at all when it's directed at entity who's shirking their responsibility. Just because something is legal does not necessarily make it right.
[1] https://www.citizen.org/sites/default/files/swamped-tax-lobb...
[2] https://www.nytimes.com/2017/12/15/us/politics/lobbyists-tax...
[3] https://thehill.com/business-a-lobbying/business-a-lobbying/...
[+] [-] blackguardx|7 years ago|reply
[+] [-] 6cd6beb|7 years ago|reply
Netflix revenue for 1 year was 845 million.
Netflix can afford a few senators if they want. Instead they just lobby existing legislators and put bills on their desks.
Corporations are not just "following the law", they're writing it.
>If you don't like the law elect different politicians
How? Government officials are far more beholden to corporations like netflix than they are to people like us. If push comes to shove then corporations can spend a trivial amount of money to crack the consensus among the group of people pushing for change.
[+] [-] omarforgotpwd|7 years ago|reply
it’s called net operating loss. when you’ve lost money over the last ten years you can deduct those losses from your gains and only pay taxes on the difference.
Makes senses, right? A business needs to cover the losses before there is really a “profit” to pay taxes on. But this ends up incentivizing losing money, and makes the silicon valley business model of raising a ton of money and running at a loss to try and dominate the market a lot more profitable
[+] [-] dawhizkid|7 years ago|reply
[+] [-] AdamHede|7 years ago|reply
Looking at a successful company like Netflix, boasting massive profits and growing fast while paying no taxes is a reasonable proxy for something not being right.
Either Netflix is doing something wrong (and the public needs to take action) or the system is broken (and the public needs to take action).
In either case, anger and discussion is in its place
[+] [-] unknown|7 years ago|reply
[deleted]
[+] [-] unknown|7 years ago|reply
[deleted]
[+] [-] nprz|7 years ago|reply
If a company is dumping waste into a lake and it is not against the law to do so, it is then wrong to get mad at the company? What if this is the behavior of all companies in the area? They all need to dump waste in the lake in order to remain competitive.
Is it wrong to become outraged at the companies for their behavior? They should not be held accountable?
[+] [-] pluc|7 years ago|reply
There are lots of things that are unwritten rules in life. The consumer is expected to follow them, why would it be any different for corporations? Not paying you fair contribution to society might not be illegal, but it sure sounds immoral to me.
I think it's about time everyone stops shrugging this shit away.
[+] [-] jlarocco|7 years ago|reply
The best way to highlight loopholes and broken parts of the tax system is to point out when they're being used and taken advantage of.
[+] [-] fatnoah|7 years ago|reply
[+] [-] smsm42|7 years ago|reply
> Netflix did it twice, and paid an average tax rate of 13.6 percent over the eight-year period
Carryover losses is the most likely reason, and focusing it on only one year makes for a good headline but terrible economic/policy analysis.
[+] [-] ahoy|7 years ago|reply
Then politicians make policy that favors those wealthy companies.
[+] [-] arjbah|7 years ago|reply
[+] [-] drugme|7 years ago|reply
The companies... make the law. That's what people are angry about.
[+] [-] lmilcin|7 years ago|reply
[+] [-] awb|7 years ago|reply
I think people are outraged because the laws themselves are unfair and special tax breaks are doled out.
> If you don't like the law elect different politicians.
In our form of government it's possible for a presidential candidate with fewer total votes to win (Trump & Bush). If we had a popular vote for President this argument would make more sense.
Also, on a ballot we're often given 2 (maybe 3) choices for representation. These representatives often need to raise money and they raise money from the companies and wealthy individuals that benefit from the tax breaks and exemptions.
Unfortunately, it's a cycle of influence (aka - light bribery) that keeps these unequal laws going.
A flat tax without exemptions seems like the fair and simple way to address this, but there's so much money to be made by making taxes complicated that it's hard to imagine well funded politicians actually passing something like that.
[+] [-] trumped|7 years ago|reply
lol, you are being hopeful. (for example, I voted for Obama because he promised to repeal the "PATRIOT" Act and instead of doing that, he made it worst)
(But I agree with you that the laws are the problem...)
[+] [-] mverwijs|7 years ago|reply
Why defend those companies?
[+] [-] vernie|7 years ago|reply
[+] [-] porpoisely|7 years ago|reply
Slave owners followed the law also. Kings followed the law.
If we can't get mad at companies for following the law, can we at least be mad at them for creating these laws?
[+] [-] xparco|7 years ago|reply
[deleted]
[+] [-] ionised|7 years ago|reply
[+] [-] clarkmoody|7 years ago|reply
I'm sure Netflix paid tons in employer contributions to employee income taxes, social security taxes, etc. They probably paid a bunch in sales taxes where they made purchases. Property taxes for data centers, office buildings, etc. So there are many more taxes that everyone pays beyond the income tax.
As others have pointed out, the tax code is immensely complex, but you probably don't need a deep explanation for a $0 income tax bill: previous years' financial performance can carry over into the current year.
As someone once told me: with complexity comes opportunity. Simplifying the tax code, regulations, and laws removes the opportunity for well-funded operations to exploit the existing complexity.
[+] [-] jjallen|7 years ago|reply
For Netflix this is true for 2018. In fact they paid $131 million for income taxes, which, as a percent of their income is way higher than "$0" which the original article claims in its.
Also, the article makes no mention of R&D tax credits, which saved NFLX $141 million in state and federal income tax credits (the second biggest component).
It would not have been difficult to find this in NFLX's 10-K.
Netflix says the Tax Cuts and Jobs Act of 2017 _cost_ them an additional $79 million
[0] "In accordance with the Act, we recorded $79 million as additional income tax expense in the fourth quarter of 2017"; https://www.sec.gov/Archives/edgar/data/1065280/000106528019...
[+] [-] shanehoban|7 years ago|reply
Edit: For those unaware, in Chrome, you can type "cache:" before the URL in the address bar (not with the quotes of course) to get a cached version from Google.
[1] http://webcache.googleusercontent.com/search?q=cache%3Ahttps...
[+] [-] 40acres|7 years ago|reply
A small or medium size business does not have the legal or accounting capability to navigate the tax code as successfully as a company like Netflix can. Similarly, even a high income individual can't stretch the tax code like billionaires can. On net it seems like the lower and middle income players subsidize the high income players both in business and personal taxes.
[+] [-] res0nat0r|7 years ago|reply
[+] [-] burp3141|7 years ago|reply
They made 1.2 billion in 2018 income before taxes compared to 485 million last year.
The corporate tax rate was brought down from 35% to 21% in 2018. So they should have paid 257 million in Federal, 33.6 in State and 63 million in foreign taxes
With the Federal and California R&D tax credits (140.7 million) and tax benefits on stock based compensation (191 million) and other odds and ends they brought it down to 15 million for an effective 1% tax rate. "In 2018, the difference between our 1% effective tax rate and the Federal statutory rate of 21% was primarily due to the recognition of excess tax benefits of stock-based compensation, Federal and California research and development credits (“R&D”), and updated adjustments related to U.S. tax reform as a result of the U.S. federal tax return filing, partially offset by state taxes, foreign taxes, non-deductible expenses and the international provisions from the U.S. tax reform enacted in December 2017."
Netflix has also deferred tax assets - easiest to think of as tax prepaid but could also include taxes paid to foreign countries, losses from previous years, etc.) of 689 million. So they counted the taxes against it.
In the cash flow stateemnt the supplemental disclosure is 131,069 for Income taxes paid. So there was actual cash tax payments made.
[+] [-] patio11|7 years ago|reply
[+] [-] beat|7 years ago|reply
1. Abolish corporate income tax.
2. Tax capital gains (and dividends) as ordinary income.
The corporate income tax is absurd. It doesn't generate a lot of revenue, but it has a bazillion highly specific loopholes, supporting a whole cottage industry of lobbyists and accountants. It's an unfair advantage to large corporations that can afford the tax-cutting power (like Netflix).
The capital gains rate is the source of our most gruesome wealth inequality. It's absurd that Mitt Romney pays half my effective tax rate on 200 times my income. The justification for low capital gains rates is "double taxation" due to corporate income tax. Abolishing corporate income tax eliminates that.
If the rich don't want to pay taxes, then they need to not liquify their investments. If corporations don't want to pay taxes, they need to reinvest their profits in growth.
[+] [-] andrew_|7 years ago|reply
[+] [-] 27182818284|7 years ago|reply
The site loads, but really slowly. I feel like it has been slashdotted maybe.
[+] [-] brink|7 years ago|reply
Here's a similar article: https://www.commondreams.org/news/2019/02/05/whatever-you-pa...
[+] [-] p33p|7 years ago|reply
[+] [-] frebord|7 years ago|reply
People see these "tax evading" corporations as so evil, but why? Do they really even remotely understand what is going on? I suspect they don't. Or maybe I don't get it.
Edit: Maybe what I fail to realize is that income for a company is essentially what I'm thinking of as cash holdings, anything else would be an expense that would be deductible?
[+] [-] tvanantwerp|7 years ago|reply
[+] [-] mortdeus|7 years ago|reply
Having a 35% corporate tax AND a 35% income tax on all earners who make more than 120k/year, means the Government would essentially recieve %70 of all of Netflix's revenues, assuming inbound revenue and outbound expenditures are maintained at a 1:1 rate of growth.
Netflix doesn't pay (nor should they be paying any) taxes right now because they invest heavily in producing original content using borrowed money. When that original content flops they still have to pay back all that money they lost plus interest.
Netflix might have made a ton of profit this year but im pretty sure they are still heavily in debted (in the billions last i checked). To tax netflix at 35% now that they are finally starting to see a return on their investment would only cripple the corporation from maintaining their upwards momentum of growth.
You only want to start taxing a corporation when they are completely self reliant on their own revenue when funding their day to day operations and investments towards R&D.
[+] [-] mattferderer|7 years ago|reply
Either way it seems that well paid accountants are easily winning the arms race on how to avoid taxes. I'm curious if a government can actually win that race.
[+] [-] zaroth|7 years ago|reply
Take a look at Netflix’s free cash flow for a better understanding of what a SaaS-type business experiencing hyper-growth looks like.
Their customer acquisition cost in this case is spending on content. That content will be consumed (and hence “paid for”) by subscribers primarily over the next 1-3 years.
So as they ramp up their subscriber count, and likewise ramp up their production spending, they are constantly outspending “Year 0” (today) to create content which will earn back that money, and then some, over the next 1-3 years.
Netflix is able to report financial metrics which show “Net Income” I think (and I haven’t dug into their statements to confirm this) because they spread/amortize the cost of licensing the content over the timeframes they expect it to be used.
Whereas for tax purposes, the money they are spending on content can be deducted fully in the year it is spent against income for that year.
As long as Netflix grows the amount they spend on content each year, they will have negative free cash flow and pay little to no taxes.
If they grow their subscribe base at 20-30% YoY it means they can spend 20-30% more on content this year than they would typically be able to spend based on their current subscription revenue. E.g. if they spend 60% of revenue on content, and content is consumed over 3 years, they can spend closer to 80% of this year’s subscription revenue on content, and in theory over the next 3 years they earn it back. By doing this, as far as the IRS is concerned their cash flow and net income is truly negative.
Eventually a company will flatten out its growth curve and the weight of servicing all that debt will require spending on content to fall below the subscriber revenue, and in the long run cash flow must be positive for a company to survive.
Keep in mind income taxes are just one for of tax revenue that is generated by a company like Netflix. There is a tremendous amount of tax revenue generated overall by Netflix, everything from taxes on the internet connectivity people are buying to use Netflix, to sales taxes and employment taxes.
[+] [-] mikece|7 years ago|reply
[+] [-] war1025|7 years ago|reply