No Wonder Zoom Can Sponsor The Rabbitohs, They Pay Next To Nothing In Taxes
Videoconferencing giant Zoom has been splashing the cash, sponsoring the South Sydney Rabbitohs in the NRL now it’s been revealed that the Company has paid next to nothing in taxes worldwide and nothing in Australia.
They achieved this by exploiting a loophole in US Federal tax laws.
Despite raking in over $840 Million the Company only paid US$20M in profits despite the US Federal tax for businesses being 21%.
The Company pulled this vanishing tax trick due to its use of stock-based compensation for employees, which helped reduce its worldwide tax bill by more than $302 million for the year ending Jan. 31.
Corporations that pay their executives in stock often benefit from a provision in the federal tax code that lets them write off expenses that appear far larger than their actual cost, according to the Institute on Taxation and Economic Policy.
“This is a strategy that has been leveraged effectively by virtually every tech giant in the last decade, from Apple to Facebook to Microsoft,” Matthew Gardner, a senior fellow at the think tank, wrote in a blog post detailing Zoom’s tax discount. “Zoom’s success in using stock options to avoid taxes is neither surprising nor (currently) illegal.”
While Zoom’s tax strategy is apparently legal and commonplace, US Sen. Bernie Sanders said the pandemic darling was taking advantage of the “rigged” corporate tax code.
You must give them some credit Zoom did pay about US$5.7 million in global income taxes last year, giving it an effective tax rate of just 0.8 percent, according to the annual report.
That amount included about $1 million in state taxes and some $3.9 million in foreign taxes. The company also recorded a deferred federal income tax expense of $689,000, though that’s separate from its $0 federal tax bill.
A Zoom spokesperson said the company “complies with all applicable tax laws” in the nations where it does business.
Zoom servers at the start of COVID-19 were based in China with concern mounting about the snooping by the Chinese government on video calls.