May 21, 2022

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Tesla did not pay a single cent in taxes to the United States, but it did not surprise anyone: “It’s almost a professional mistake”

Despite making record profits last year, Tesla has not paid a single cent to federal tax authorities in the United States. The most obvious reason is that Tesla declares its income as a tax haven. According to one analyst, it is possible that Tesla will have less revenue in the United States than it claims.

With 50 percent growth and nearly a million cars sold, 2021 is a truly record year for Tesla. Despite those numbers, Tesla does not have to pay federal taxes in the United States, reports say CNN† Tesla CEO Elon Musk is even more notable I want to remind everyone How he “pays more taxes than any other American in history.” This is how Musk paid Sale of its stock options In the fall of last year – they say, about $ 11 billion in taxes.

How does Tesla not have to pay taxes? The US media has drafted the bill: by 2021, Tesla will have $ 5.5 billion in net sales and $ 7.6 billion in adjusted revenue. In a document submitted to the SEC, the footnote states that the automaker suffered a loss of more than $ 130 million in the United States. That is, all of the company’s profits – more than $ 6 billion – come from its overseas operations. However, 45 percent of sales come from sales in the United States.

In terms of taxes, Tesla claims to pay $ 839 million in foreign taxes. The company will pay approximately $ 9 million to the US state of Texas, which is headquartered in Tesla. Not even a cent came into the federal treasury.

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This seems very strange. “It violates public knowledge, but is fully compliant with U.S. tax law,” said Martin Sullivan, an economist at NGO Tax Analysts and an expert on U.S. corporate taxes.

Line paradise

A common practice among multinational corporations is to set up the company in such a way that their income is recorded abroad. In this way, little or nothing was reported at the US branch. According to Martin Sullivan, that could explain why Tesla is recording a $ 130 million loss in the United States.

For example, a branch of a company abroad may dispose of intellectual property, after which the US branch pays to exercise those rights. Ultimately, this will cause the U.S. branch to lose out, while the same company overseas will receive revenue. “It’s a common occurrence in American multinationals. It’s almost a professional mistake not to do so,” Sullivan said.

Income is certainly recorded at certain tax havens in the Cayman Islands, Luxembourg, the Netherlands, Ireland, Switzerland, Bermuda or Singapore. A recent report from the U.S. Treasury Department shows how 61 percent of U.S. multinationals record their profits in one of those seven countries. However, it is not known in which country Tesla is recording its profits.

So Biden management wants to shake up the whole system. Plans to cancel their tax breaks are on the table if large companies are found to have registered their earnings abroad. So far, no attempt to amend the law has been successful.

Shortage and government assistance

Another way for companies to evade taxes without registering their sales abroad, according to CNN Using past losses. They offer a tax deduction in the future. Amazon, for example, has greatly benefited from this system. Airlines also benefit from this: the losses caused by the epidemic are enormous. As compensation, airlines will not have to pay taxes in the coming years, even if they benefit from government support.

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This is called Net operating loss moves forward. As a result, Tesla does not have to use foreign construction or pay federal US taxes. Tesla, for example, has been at a loss for ten years and was only able to get through government support. Those losses were mainly due to the high production costs that Tesla had to build its cars. Over the years, however, demand has increased and costs have fallen. In 2020, when Tesla made its first profit, Tesla reached the pinnacle.

But Tesla has not yet taken advantage of those Goldmine tax breaks. On top of that, it’s hard to say if the company will ever use it. Sullivan said the company could not take advantage of the “discount” until Tesla’s US operations caused a loss. So Tesla does not think that the current losses in the United States are temporary. However, 50 percent growth is expected for all operations of the company.

What if the loss is a real loss?

Tesla’s losses in the United States may indicate that the company is not profitable. If so, get more profit from the cheap Giga factory in China. At least Gordon Johnson of GLJ Research believes that. Tesla started production in China in 2019 and is already profitable in 2020, a year later.

“The truth is that Tesla did not use it Net loss goes forward It shows the manufacturer is losing money outside of China, “said Johnson.

However, despite what the IRS says, other experts estimate that Tesla’s profits are real. It also means that the company outsources certain functions to the tax haven. According to Johnson, this shows a lack of total transparency.

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