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  • In July of 2017, Jeff Bezos made history and surpassed bill gates as the richest man in

  • the world with a net worth of 153 billion dollars.

  • To understand his scale of wealth, let's look at some numbers.

  • Earlier this year, Jeff announced that he is separating from his wife Mackenzie but

  • because they live in Seattle, his wife has the right to a large portion

  • of his wealth, to be more precise - 35 billion dollars, that will make her 3rd richest woman

  • in the world.

  • But Jeff isn't worried because he will still be on the top of the list with over 110 billion

  • dollars.

  • That's how rich Bezos is, he can afford a divorce and still be on the top of the Forbes

  • list.

  • Behind his enormous wealth, stands a conglomerate and if you know anything about Amazon, you

  • know that it is on the way to take over the world.

  • But did you know that this company that's valued almost at a trillion dollars, paid

  • 0 dollars in federal taxes?

  • To understand how this guy with such a loud laugh is making billions of dollars while

  • not paying taxes at all, we have to take a look at history!

  • We know Amazon as the place to go for online shopping.

  • But for Netflix, uber, and thousands of others, Amazon is their way to the internet.

  • They rely on amazon web services for their websites to function.

  • What started as a side project to support amazon.com quickly grew into a multi-billion

  • dollar company by itself, earning more money than Amazon ever had.

  • In fact, if you take a look at the numbers, more than 41 percent of the internet relies

  • on AWS.

  • Only big corporations such as Google, Microsoft, and Facebook aren't on the mercy of Amazon

  • since they are big enough to build their own infrastructure.

  • But that's not the only industry that Amazon has its grip on.

  • Even for us, the consumers, Amazon is no longer the middleman who connects buyers with sellers.

  • It's becoming the seller itself.

  • Amazon now sells more than 450 if its own brands from watches to clothes.

  • Cables to furniture.

  • Competing with the rest of sellers on the platform to be on the top of the list and

  • since its Amazon, they definitely know how to keep their products on the main page.

  • And its only a matter of time before everything that's sold on Amazon will be produced by

  • Amazon itself.

  • for an Amazon box to reach your door, it needs to go through many hands.

  • from a tuck to a plane to a van and maybe then to your doorstep. and Amazon has heavily

  • been relying on UPS, FedEx and US postal service.

  • but that's about to change.

  • To be more precise, it's already changing.

  • Amazon now has more 50 planes and hundreds of vans and semi-trucks to ship its own products.

  • It already handles a quarter of its shipping.

  • and it doesn't seem to stop there.

  • Remember Amazon web service, it started to provide servers to Amazon websites but quickly

  • began providing servers for everyone else. and it seems like Amazon wants to do the exact

  • same thing with Amazon fulfillment and become a logistics company.

  • Although Amazon is a small fish compared to UPS and FedEx in the logistics industry.

  • Amazon is on its way to change that.

  • Once Amazon is completely self-sufficient, it can easily drive shipping cost down.

  • It doesn't have to make a profit since it has multiple other businesses that already

  • generate billions of dollars in revenue and once UPS and FedEx are out of business, then

  • Amazon can slightly increase the prices and enjoy unbelievable profits since it will the

  • only player in the market.

  • Amazon doesn't just want to be the place where you periodically buy strange gadgets.

  • It wants you to buy groceries at Amazon, that's why it purchased whole foods market.

  • Many of us still prefer to physically go to the store but we all know that it is about

  • to change.

  • and Amazon doesn't want to miss the opportunity to take over the industry.

  • The grocery business is definitely competitive but no one is more qualified to do that than

  • Amazon.

  • They have the technology, experience, and money!

  • Even though Netflix relies on Amazon.

  • Amazon is on its way to change that.

  • In 2010, Amazon launched Amazon studios to challenge Netflix.

  • Of course, they are too small to be compared to Netflix, but that's what the bookstore

  • managers said when Amazon started selling books online.

  • They will keep pouring money and creating as many shows as they need to convince you

  • to switch to Amazon studies.

  • And unlike Amazon.

  • UPS, FedEx, and Netflix do not have a side business that earns them a pile of cash!

  • You see, Amazon is playing the long game, Instead of making a profit, amazon simply

  • reinvests its revenue back into the company to grow bigger and faster.

  • In fact, sometimes the company didn't even make a profit because they poured every dime

  • they made back into the company to take over other industries and reported a loss although

  • they could have made billions of dollars in profit.

  • And when you make a loss as a company, you can carry them forward and write them off

  • from future tax bills, which is what Amazon has been doing.

  • But that's not all.

  • Every nation wants its companies to be technologically competitive.

  • So to encourage companies to spend more and more on research and development, governments

  • offer tax credits and amazon is simply taking full advantage of that.

  • Its spending billions of dollars to automate its warehouses for example.

  • build better gadgets and voice assistant like Alexa.

  • It's improving its web services to stay competitive and pouring billions on amazon go for example.

  • On top of that, the recent changes by Donald Trump on the tax code made it even better

  • for Amazon.

  • Now, they can write off their depreciation right from the beginning instead of splitting

  • it for over multiple decades.

  • And then there is stock-based compensation.

  • It's actually a common practice among the companies.

  • Instead of paying their employees in cash, amazon pays them in amazon shares that it

  • creates out of nothing and then simply writes off those shares from its tax bills.

  • In this way, Amazon isn't only getting free employees but also lowers its tax bill significantly.

  • Last year, it reported over a billion dollar in stock-based compensation tax benefits.

  • It's simple but quite nasty!

  • Its sounds simple in theory but quite difficult in practice, because to do this you need the

  • stock price to constantly rise and if you give it a closer look, it's a very well planned

  • strategy.

  • Amazon makes billions of dollars in revenue but then uses that cash to take over other

  • industries and deducts it from its tax bill, that keeps the stock price increasing which

  • allows amazon to pay its employees in stocks instead of cash and writes that off again

  • from its tax bill.

  • So, at the end of the day, the company keeps growing making Jeff Bezos wealthier but their

  • tax bill stays fairly moderate.

  • In 2018, the company reported 11.3 billion dollars in profit, instead of paying 35% corporate

  • tax, it had to pay only 21 percent or 2.37 billion dollars since Donald Trump reduced

  • the corporate tax tokeep American firms more competitive”.

  • But amazon's tax credits and stock-based compositions amounted to 2.5 billion dollars.

  • So instead of paying income tax, amazon actually got a 129 million dollars tax refund.

  • In fact, it wasn't their first year, a year prior to that, in 2017, the company also paid

  • nothing on its $5.6 billion U.S. profits and claimed a tax fund of $140 million.

  • It seems like Bezos long term strategy paid off.

  • Just to be clear, that doesn't mean that Amazon doesn't pay taxes at all, it still

  • pays state, local and international taxes for example.

  • But their tax bill is significantly smaller compared to their size.

  • At the end of the day, how many trillion-dollar companies do you know?!

  • Whether it's good or bad, that's up to everyone's interpretation, but Amazon is simply

  • taking advantage of the system and you can't really blame them for that.

  • In fact, they are not the only one, companies were doing that for decades.

  • Remember, the purpose of any business is to maximize profit and not pay taxes.

  • On the other side, Amazon has provided jobs to hundreds of thousands of people, not only

  • in America but around the globe.

  • It's the second biggest employer in America just behind Walmart.

  • Thats probably the main reason why amazon has been growing exponentially since its inception.

  • If you have invested just a thousand dollars in amazon back when it was founded, you would

  • be have made 1.3 Million dollars by 2018.

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How To Legally Pay $0 in Taxes - How Billionaires Do It

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