Nowadays, creative accounting has become familiar with us. Some big companies which own excellent accountants can exploit loopholes to minimize their bills. Amazon is also one of those companies. To respond to a growing public anger over tax avoidance, the public accounts select committee in order to ask Amazon to explain structures of Luxembourg-registered offices which incur lower tax rate. a. Literature review on the topic of the news The term 'creative accounting' can be defined as accounting practices that obey regulations and required laws, but deviate from what these standards intend to accomplish. It means that creative accounting take advantage of loopholes in the accounting standards in order to make the company seem more successful …show more content…
Tax avoidance is using of lawful methods to change an individual's financial situation so as to cut down the amount of income tax owed. This is usually accomplished by claiming the acceptable deductions and credits. Almost all taxpayers use a several forms of tax avoidance. This practice is different from tax evasion, which is unlawful. b. Review of the news in a chronological order To reduce UK tax bill, Amazon, the UK's most popular online retailer, has done business through Amazon EU SARL, which is the Luxembourg subsidiary. When consumers order products from the website of Amazon, the payment will be transferred through the Luxembourg arm of Amazon, which will pay the British branch a delivery fee. In the UK, Amazon owns over 5,000 employees, but takes advantage of Luxembourg's extremely low corporate tax rates. According to Amazon’s 2012 public accounts, it whipped more than £11 billion through Luxembourg subsidiary in 2013 and the revenue increased by 14% in that year before reimbursement by the Government of Luxembourg. In 2013, Amazon generated sales of £4.3 billion in the UK. Nevertheless, the payment for UK corporation tax of the online giant retailer Amazon was only £4 million. The amount of tax payment is only equal to 0.1% of the £4.3 billion in sales which Amazon created in the UK in that …show more content…
The high-street stores have been severely decreased by online retailers which are actually eating up the entire sectors. Furthermore, the number of jobs which almost all online businesses create is very few in fact. All of internet companies relocate their profits abroad, disappear from the GDP and deprive the governments from marginal turnover that should commonly arise from higher productivity. Besides Margaret Hodge, Richard Murphy of the Tax Justice Network is a fairly vocal campaigner on tax, and has the ear of a lot of people in the media and politics, so it is worth looking at his views. He said that altering tax rules to avoid tax arrangements like creative accounting applied by Amazon is regarded as a big duty. The main problem is that “what is sold here” and “what is sold 'into' here”. The answer is to deem distance sales people as residents in British relating to their sales made here, which can be an important problem to take on. In conclusion, this online retailer exploited the Luxembourg loophole for tax avoidance. The creative accounting practices of Amazon is not illegal, but this company has been seriously criticized by consumers, politicians and other retailers about the tax payment it pays to HM Revenue & Customs in British. "We need serious tax reform to ensure everyone pays no more or less than their fair share” – Sinclair
Ronald Reagan’s election cost a profound $57.7 million dollars (Cox, 2012), and would not have been possible without his wealthy backers. Reagan owed a lot of favours to the wealthy elite who funded his campaign, and lowering income tax for the rich was the result. In reality “trickle down” did not occur. Reagan cut the overall income tax throughout America by an average of 23%, however the income tax for the wealthiest America was cut from 70% to 28% (Sahadi, 2010). It is estimated that the top 1% of Americans gained $10 trillion from Reagan’s tax cuts, at the expense of the bottom 99% (JMH, 2011).
But again it's not fair to say the wage gap is not a problem especially with these numbers but with how taxation is heading it should be put more equally instead of pinning it on the rich.” ... There is no sustainable way to make the poor richer by making the rich poorer…”-Richard A.
Should America implement a flat tax? According to Steve Forbes “For many years, people have said, ‘Make the rich pay more,’ and many politicians have said, ‘The rich people need to pay their fair share,’” (Forbes) but what do we think is really fair?
“The Federal tax system has always served purposes beyond the collection of revenue to fund Government programs” (Farrigan). The people of the United States pay taxes to the government to multiply the money by doing business related negotiations with other countries. In addition, the government uses the peoples tax money in programs such as Medicaid or children’s health insurance, food stamps, and unemployment benefits. Consequently, the government gives back the people’s tax money, but because of the people the government can support, give, and help the people in need. The government multiplies the peoples tax money and since the people are investing their tax money than is only right the people get a beneficial raise on their tax return money.
Some people with be mad about getting taxed more and some people wouldn’t mind getting taxed more as long as it is doing something like helping someone that needs help or saving their lives. “About 800 000 people commit suicide every year… Mental disorders and harmful use of alcohol contribute to many suicides around the world. ”(www.who.int) The people I think that won’t like getting taxed the most are people like Lennie and George who are struggling with money as is
In just a month of its establishment Amazon was selling books to all 50 states of the US and Canada. From the onset the company had ambitions of being an “everything store” (funding universe, 2004). Over the years Amazon increased its offerings to include DVDs, electronics, furniture and other consumer goods (Amazon.com, 2015). The product range increase was accompanied by a series of acquisitions. Oliva et al (2003) describes Amazon to be using a get big fast (GBF) strategy which is premised on keeping prices low while expanding market
An accounting memo should be a one-stop shop when it comes to forming a conclusion on an accounting issue. A company would reference an accounting memo to gather information regarding the transaction, accounting evaluation, and reason the position was taken on a problem or issue. The five critical components are listed below as a guide to prepare a professional accounting memo. I. Facts & Background • This section of a research memo is used to describe all the relevant background information to fully comprehend the needs of the transaction and the accounting behind it. •
Inc., n.d.). In 1994, when Amazon was founded it was running out of the founder Jeff Bezos’ garage, making $20,000 per week in profit. Recently in 2014, Amazon has acquired the title of “The Everything Store” with 154,100 full time employees working for it, and it earned $90 billion in revenue. Amazon has broadened its market by allowing sellers to sell their new and used items along with Amazon products, giving customers the option to choose a product that matches their affordability (shorr,
Many states within the United States have passed online shopping sales tax laws which have been designed to compel Amazon and other e-commerce retailers to collect both state and local sales taxes from their customers. In 2011, it was noted that Amazon only collected sales tax from five states, however in April of 2017, it was said that the company must collect sales tax from consumers in all states that currently have sales taxes. ANALYSIS OF STRATEGIC FACTORS In a December 2011 article written by Forbes contributor, Venkatesh Rao, he states that “the company [Amazon] is nothing if not deliberate and systematic in everything it does.” Rao goes on to say, unlike the other big companies that symbolize our times – Google, Apple, Facebook and Microsoft, Amazon did not rise to power by inventing a new product or service.
Amazon has achieved many milestones from starting in the founder’s garage in 1994 to the growth in revenue to US$147.8 million in 1997 and then to the revenue growth of US$177.866 billion in 2017 (Amazon, 2018a, Amazon, 2018b and Jurevicius, 2018). These milestones were achieved through tenacious focused strategies of meeting their customers’ needs and wants. These strategies have maintained and expanded their customer base locally and internationally and have increased its market shares and profit over the last two decades. In addition, projection for the company’s growth and expansion for the next three to five years looks positive as it predicted to grow at the same rate with its expansion internationally and continued focused in satisfying consumers’ wants (Amazon, 2018a). Although, some factors such as governmental policies, legal issues and natural disasters could pose a threat to Amazon’s growth plans, the management team led by the founder and Chief Executive Officer (CEO) are working on mitigating the risk (Amazon, 2018a).
Analyze Amazon.com using the competitive forces and value chain models. How has it responded to pressures from its competitive environment? How does it provide value to its customers? a) Competitive forces analysis i) Entry of competitors It is easy for competitors to enter the market by establishing an e-shop and Amazon laid the groundwork for competitors (Flat World Business, n.d).
We will also look at how Amazon builds trust with their customers to keep them coming back to shop. Additionally, this paper will analyze the internal strengths and weaknesses of each company and their strategies used to increase profitability and efficiency. By using each companies balance sheet, income statements, and financial ratio we will be able to see how each company is performing and if they are staying ahead of the competition. After looking at all aspects of both companies functionalities, we can the make recommendations of ways to improve their competitive advantage so that the companies continue to be front runners in their competitive markets. Mid-Term Exam Industry Overview
5 – Main risks going forward for Amazon.com are to loose its competitive advantage because of opportunities that Internet offered to its competitor : low prices, deliver, costumer’s service, etc. Moreover, if the business develops, it may encounter logistical problems and limits : geographical and logistical constraints (energy, delivery and connection and some contries) and legislative constraints (censorship, taxes and state agreement : Corea, Sri Lanka, Indonesia, etc). Founded in 1994, Amazon started as an online bookstore and quickly became popular as it received high marks on several Internet rankings. Today, Amazon.com, Inc. is the world's largest online retailing company headquartered in Seattle, WA
Walmart, Amazon, and EBay 1. Analyse each of these companies using the value chain and competitive forces models. The value chain model of Amazon in itself is internally and operationally the best that adds value and maintains competitive advantage. The primary activities include Inbound logistics for example quality control, receiving, raw materials, control and supply schedules; Operations for example packaging , maintenance, quality control; Outbound Logistics for example
It is this that justifies accounting history as a crucially important academic discipline. “History, in itself is instinctive and indigenous to all of us” (Carnegie. et al, 2011), whether individuals know it or not, everyone’s decision making process is strongly based on past experiences, and the past is the key source resorted to whenever a decision is needed to be made. The same is applicable to accounting, the decisions made today in all practices and approaches are drawn from the historical developments in the accounting process, that have led the practice