Netflix Paid Zero U.S. Income Taxes Despite $845M In Profits Last Year

Netflix, the streaming enterprise widely used across the world, managed to escape paying a single cent through income taxes despite their record profits over the last year. When the company isnât creating faux-scandals surrounding their odd depiction of notorious serial killer Ted Bundy, the big tech giant is being approved for federal tax rebates and exploiting loopholes to avoid paying their fair share, as discovered by The Institute on Taxation and Economic Policy (ITEP), a non-partisan tax policy think-tank, who investigated Netflixâs recent corporate tax filings.
âAfter a year of speculation and spin,â wrote ITEP senior fellow and tax expert Mathew Gardner, âthe public is getting its first hard look at how corporate tax law changes under the Tax Cuts and Jobs Act affected the tax-paying habits of corporations. The law sharply reduced the federal corporate rate, expanded some tax breaks and curtailed others. The new tax law took effect at the beginning of 2018, which means that companies are just now closing the books on their first full year under the new rules.â
According to the documents, the companyâs profits exceeded $845m while rebates include $22m by the federal government and $10m by state governments. The story is being disputed by Netflix who claim theyâve been misreported and that theyâve paid an exorbitant amount of taxes globally, suggesting their need for tax relief on a domestic front. âWe do not disclose the US-specific figure we paid,â said Netflix spokesperson Sarah Jones. âThe amount of cash taxes we pay, which we disclose as $131 million (total), is not the same as the provision for taxes [money the company forecasts it will spend on taxes].â
The figure cited is accurate, though doesnât tell the whole story. âIt is true that Netflixâs cash payment of worldwide income taxes in 2018 was $131M,â Gardner told The Daily Mail this week. âBut that is a worldwide number â [not specifying] the amount Netflix actually paid to national, state and local governments worldwide in 2018. This tells us precisely nothing about the amount Netflix paid to any specific government, including the U.S.â

âItâs pretty clear thereâs a consistent story being told here,â Gardner continued to elaborate. âIn all likelihood, every last dime of that $131 million has to do with foreign income and foreign taxes. We donât know for sure but it sure looks that way based on current and cash income taxes.â Another ITEP study found that between 2008 and 2015 Netflix also refused to pay income taxes despite their lavish profits across the globe. As we see the company at record high growth, laws new and old donât seem to be catching up with the marketâs tax avoidance.
After months of market speculation, Americans are finally beginning to see the concrete effects of the Tax Cuts and Jobs Act, the law overwhelmingly passed by 2017âs Republican-controlled Congress which dropped the corporate tax rate from 35% to 21% â the policy that was touted as a victory by the so-called anti-establishment President Donald Trump. While Reuters reports the average rebate for American citizens is as low as $1,865, there is a question hanging on everyoneâs lips: how did Netflix avoid the taxman?
It wasnât the company that randomly decided to be financially transparent. Instead, it was ITEP and news outlets who began searching through the companyâs publicly available 10-K report, which is described as âan annual financial disclosure required by the U.S. Securities and Exchange Commissionâ, which allows us to deduce the loopholes corporations use to avoid paying their market bounties. While the details remain unknown, which is expected of a private corporation keeping details close to the chest, experts say evidence points to the abuse of the tax credit system enabled across decades of political misfires.
Gardner explains this case as an example of perpetuated policy failures, crediting varying Congresses and administrations in their inability to attack the loopholes that result in this avoidance. He explains foreign earnings are left untouched by the illusion of unjust âdouble taxationâ. This is a flimsy excuse used by corporations and their executives who want to ignore how various incomes are already taxed multiple times. The small-business boss doesnât avoid taxes just because of payments made to his workers. The worker doesnât avoid taxes despite the contributions of their bosses. Why should a domestic corporation â the biggest in the world, mind you â avoid taxes domestically for their lavish contributions abroad?
The new law allows this same behaviour to continue, just with a lower tax rate suggested on paper. âItâs not a matter of creating a problem,â Gardner concludes, âitâs more accurate to say Congress and the Trump administration utterly failed to fix an existing problem and this is evidence of that. Itâs not like thereâs some gigantic, new gaping hole in our tax system that Netflix is taking advantage of. Itâs just that we didnât get rid of the bad stuff they were taking advantage of before. With a record number of subscribers, the companyâs profit last year equalled its haul in the previous four years put together. When hugely profitable corporations avoid tax, that means smaller businesses and working families must make up the difference.â

Thanks for reading! This article was originally published for TrigTent.com, a bipartisan media platform for political and social commentary, truly diverse viewpoints and facts that donât kowtow to political correctness.
Bailey Steen is a journalist, graphic designer and film critic residing in the heart of Australia. You can also find his work right here on Medium and publications such as Janks Reviews.
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