In a new series looking at numbers behind the news, FT statistics journalist Federica Cocco and data journalist John Burn-Murdoch investigate whether companies are hiding behind philanthropic giving while avoiding tax
Hi i’m john and i’m a data journalist here at the ft and an federica i’m the ft is $36 in this series we’re going to look at the numbers behind the news headlines and we’re going to show you how you too can seek the statistical evidence behind any news story a couple of months ago economic historian rutger bergman was speaking at davos where he raised the issue of
Philanthropy and whether the biggest corporations in the world and their bosses are being benevolent and generous in the billions that they give or whether they’re actually avoiding contribute to society by not paying their taxes so does he have a point or a philanthropist just really avoiding tax and if so how much i heard people talk in the language of participation
And justice and equality and transparency but then i mean almost no one raises the real issue of tax avoidance right and of the rich just not paying their fair share ten years ago the world economic forum asked the question what must industry do to prevent a broad social backlash very simple just stop talking about philanthropy and start talking about texas texas
Texas that was interesting it obviously rough with a lot of feathers and you know it’s very much of the zeitgeist we’ve got alexandria ocasio cortes in the u.s. talking about big tax rates combien and labor talking about the same thing over here but i guess i think we were chatting about is like what’s what are the numbers like behind this and what’s the big deal
With tax avoidance is legal isn’t it why are we so worried about it yeah so technically you know tax avoidance is when people use legal methods to you know declare income in a certain way legal loopholes some people would say but the point is it’s legal so the same it’s tax evasion exactly tax evasion of course very different this is where people perhaps don’t
Declare income at all so it’s the cash in hand economy the shadow economy or the high end of the spectrum it’s people who are simply not declaring high income so they avoid they scape the system altogether so shall we have a look at an example of tax avoidance sure where do you suggest we begin how about amazon all right everyone’s favorite delivery company i’m
Gonna have a look at how much taxes amazon paid first of all let’s have a look at how much money they made which is a coke what should be cat so yeah so this is in 2016 three tax profits they made 4.5 billion pounds 2017 they made even more 5.4 2018 off the charts literally no 11 11 billion dollars so the us corporate tax rate the top rate until the republican tax
Bill came in late last year was 35% so if it was 35% in 2016 and 2017 i guess i’ll expect for those years it would be just under 2 billion in the first year and then around 2 billion in the second year you are wrong they paid 45 million in 2016 45 million and these are billions yes so i don’t know how to show this 2017 they actually got money from the government
So let’s add a hundred and forty three label 2018 i mean 2018 they got 130 so actually they they got a tax rebate from the government so they actually got money and did not pay any taxes so what you’re telling me is an amazon over that three-year period alone made about twenty billion in pre-tax profits and you know they gave away a bit but to uncle sam in 2016
Yeah but then the following two years they got money back and so so yellow so let’s have it let’s just jot this down so that’s 20 billion over those three years give or take in taxes shall put on the right here 50 million and then they got 130 plus 140 nuts all right they’re about 270 million okay but jeff bezos donated two billion dollars in total okay i mean
You know that’s that’s nothing to sniff at but i’ve been running some numbers myself you know self-confessed and massive and so we said 20 billion over those three years if you go right back to 2009 then it’s about twenty seven billion dollars that amazon have taken in pre-tax profit now over that entire so ten ten year period and okay they’ve done a bit better
Than the two hundred and seventy million in terms of taxes but it’s still one billion that they’ve that they’ve given to the us government so we’re talking like less than less than four percent of the profits they made there despite the fact that for most of that period corporation tax was around thirty percent so you’re saying good old jeff he’s given two billion
To his foundation but if if they had paid if amazon had paid taxes at thirty five percent which was the top corporate tax rate until the most recent tax cut nine point five billion would have gone in taxes so if i do that nine point five minus the one that’s a tax gap of eight and a half billion and jeff was given two billion so you know i mean good on him but
It seems like he and amazon are still the sort of net beneficiaries there let’s leave amazon a site then have you ever heard of a guy called bill gates and his wife melinda the name rings a bell so they launched their foundation they ended up over this period of time they ended up donating thirty five billion dollars thirty five is a lot more than two he’s been in
The business a bit longer i’ll give him that and but again unfortunately i’m gonna have to to point to our ledger here and according to a few a few studies that were done in 2016 microsoft of course the company where he made most of his billions and has been keeping a hundred and forty two billion dollars offshore of profits so that’s that’s profits they made no
Tax has been paid on those yet they’re sort of being held indefinitely overseas had they been taxed at thirty five percent that would have meant forty nine point seven billion would have gone into the us coffers again fantastic that belinda and bailed donated but that still leaves a gap of fourteen point seven billion so again i’m loving the philanthropy but it
Still looks to me based on these you know scrappy calculations the the money that’s been given back isn’t quite the money that was taken out of the system in the first place okay so these are huge corporations though and the whole point is that the state is losing this money in theory so how much money is the state losing okay well i mean i guess there’s a there’s
A few different scales we can look at this on so across across the whole world 500 billion according to my research is lost on tax avoidance each year so this is just avoidance again one of the two things we’re talking about and then if we can look at this by country let’s see so let’s say each unit of money here is 1 billion so i’ve got a hundred here another
89 that 189 billion is how much tax avoidance terry’s in the us alone i can then look at china where the figure is a slightly more modest 67 billion in china next on the list would be japan which is just 47 and bringing up the rear in terms of the big four is india which is on 1 1 billion so the story there being that the us is really the the capital of attack of
Corporate tax avoidance so they were with 189 billion going there okay so 189 billion sounds like a lot of money but what would that actually pay for i mean the state is huge if i look at the us budget let’s look at where this well this money could provide so education i think we all we all care about that so i’m gonna use so my handy little props here and 112
Billion dollars in in the latest budget so let’s get let’s get some more greens out let’s say that green is education 112 went on that other stuff that i think we can all agree is really important so the the supplementary nutrition program in the u.s. so what used to be called food stamps there’s about forty billion goes on that and then another thing that i think
We can all agree is pretty crucial is children’s nutrition represented by their milk bottle there and so education food stamps children’s nutrition all of that so yes 108 you know i’m billion it’s not the size of the us state but that could be doing a hell of a lot of good and instead it’s just out of the system one other issue we’ve not addressed yet is you you
Know your mates jeff and bill and melinda and they’re giving a lot of money to to good causes here but but exactly which causes are they giving it to money when people donate is that money going to the same places that it would if the government distributed was it going okay so i had a look at philanthropic donations and we’ve got ninety one percent of money that
Is donated to education causes that globally always are we talking about this is in the us and then sixty three percent of funding that goes to the arts that comes from wealthy individuals those are pretty impressive figures but i guess there’s there’s two particular holes i’d like to pick in that being being the annoying so that i am so one thing i looked at on
Education is when we talk about philanthropic donations to education here are we talking you know the poorest schools in struggling neighborhoods are we talking ivy league schools and some stats i saw show that the top 20 ivy league colleges so the most elite higher education institutions in the us they account for only one percent of college places in the us but
Twenty-eight percent of these philanthropic donations and the other one i think this is really striking is if i replicate your pie chart style 91 percent of funding for donations to education from the richest people great sixty-three percent of donations to the arts from the richest awesome but if we look at the basic needs giving so money for people who are really
At the bottom end of a spectrum only 38% of that comes from high net worth individuals 62% of the normal man and woman on the street to my eyes that shows that the wealthy when they do give they give it to things that they benefit from and not necessarily to others well i guess neither you nor i think that philanthropic donations can completely wipe out and replace
The government they just serve different purposes true but i would say that yes philanthropic giving is good but if that money is being given to to the pet the causes of the wealthy and that money is money that would otherwise have gone into government coffers through taxes and being distributed more more evenly than for me that’s something we’re going to look at
Yeah okay but i’ll just add that thirty-five billion dollars that bill gates gave out if he’d been taxed on that there would have never been donated true true so the numbers do appear to support fragments argument that corporations are only giving away a small portion of what they own on the other hand others might argue that these two forms of funding are not
Mutually exclusive and these billions from philanthropist are still going to a good cause we’re going to leave links to all the sources that we use below the video if you’ve got any thoughts on anything we discussed today or any suggestions what we do next time leave a comment and if you like you can subscribe to our you tube channel you
Transcribed from video
The numbers behind big tech's tax avoidance | Crunched By Financial Times