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Amazon Chief Executive Officer Jeff Bezos was greeted by angry protestors accusing him of “crushing” Indian e-commerce and retail trade during his visit to India on Jan. 15.
Infuriated small store owners demonstrated in the streets to protest Amazon’s deep discounting, which has driven many local small businesses, including traditional street vendors, to bankruptcy.
“Announcing investment of 1 Bn dollar by @JeffBezos is nothing but promotional finance to @amazonIN for crushing Indian #ecommerce & retail trade by more predatory pricing & deep discounting.” tweeted Secretary General of the Confederation of All India Traders Praveen Khandelwal.
CAIT has announced that members of its affiliate bodies across the country would stage sit-ins and public rallies in 300 cities, according to Business Insider, to protest against the world’s largest online retailer.
Khandelwal alleged that Amazon, much like US-based, Walmart-owned Flipkart, was an “economic terrorist,” BI reported, who engaged in predatory pricing that deprived the government of tax revenue and “compelled the closure of thousands of small traders” in a letter he penned to the Indian Prime Minister, Narendra Modi.
Indian investigation of Amazon
India’s antitrust regulator initiated a formal investigation hours before his arrival, msn reported via Bloomberg.
India’s antitrust chief Ashok Kumar Gupta said that big e-commerce companies in India should not offer deep discounts which can potentially hurt small-scale brick and mortar retailers in India, Aditya Kaira tweeted.
Indian shopkeepers had accused Walmart and Amazon of indulging in heavy discounts and giving preferential treatment to select sellers, The Business Times reported.
On January 13, market watchdog, the Competition Commission of India ordered an inquiry into the operations of both Amazon and Flipkart on multiple counts, including deep discounts and exclusive tie-up with preferred sellers.
Amazon is growing its market domination, across the globe on the back of revenues that are largely untaxed, and can unfairly undercut local businesses that pay required tax.
Amazon paid the least amount of tax among the Silicon Valley Six
Silicon Valley tech giants also known as the Silicon Valley Six, which are made up of Facebook, Apple, Amazon, Netflix, Google and Microsoft, are said to have ”aggressively avoided” paying hundreds of billions of dollars in taxes around the world.
- Income shifting
“The Silicon Six and Their $100 Billion Dollar Tax Gap” report published by The Fair Tax Mark, the cash tax paid by Amazon was 12.7 percent of profit over the decade, at a time when the federal headline rate of tax in the United States was 35 percent for seven of eight years under examination.
- Greater tax deductions
“Tax minimization through shifting profits to nations with lower tax rates is not the only strategy the retail giant adopts,” independent tax expert Robert Willens told The Millennial Source.
“In the case of Amazon, for example, companies who have enjoyed great stock market success and who routinely compensate their employees, in whole or in part, with restricted stock and stock options, will enjoy very large tax deductions when the stock-based compensation becomes substantially vested,” Willens said.
These stock options are recorded as an expense. The expense is not only tax deductible but also deducted at its actual market price (even though the stock costs relatively less or nothing at offering for the company.)
When the company’s taxes are being paid, the company is able to claim a “very large” tax deduction.
United States’ response
In 2018, US President Donald Trump raised concerns over Amazon’s cash tax paid and its ability to drive thousands of retailers out of business.
“I have stated my concerns with Amazon long before the election. Unlike others, they pay little or no taxes to state and local governments, use our postal system as their delivery boy (causing tremendous loss to the US), and are putting many thousands of retailers out of business!,” Trump tweeted.
However, Trump has also repeatedly and publicly slammed Bezos as well as The Washington Post for “fake news” coverage of him and his administration. Bezos has ownership in The Washington Post.
Amazon paid zero dollars in federal taxes in 2019 due to unspecified tax credits and executive tax options, according to CNBC.
Amazon to inject $1 billion into the digitization of Indian small businesses
Bezos is in New Delhi for the Sambhav summit, an Amazon India gathering for small and medium businesses, where he announced Amazon will invest a fresh $1 billion to help bring small business online, the South China Morning Post reported.
He said that Amazon will export a total of $1 billion worth of made-in-India goods by 2025, Digital Commerce 360 reported via Bloomberg.
“The 21st century is going to be the Indian century. This country has something special: its dynamism. I also predict that the most important alliance in the 21st century will be between India and the United States,” said Bezos.
India is said to be Amazon’s most important overseas market, Tribune India reported, and a key growth driver.
“We’re going to use our global footprint to export outside of India,” Bezos said at the event, attended by representatives from more than 3,000 of the type of businesses Bezos said he wanted to help.