To Jeff Bezos, CEO Amazon, Inc: President Trump’s Tax Reform Proposal

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Memo to Amazon’s CEO
TO: Jeff Bezos, CEO Amazon, Inc
FROM:
DATE:
SUBJECT: President Trump’s tax reform proposal
This memo will address President Trump’s proposed tax changes on corporate taxation and repatriation tax as well as impact of the proposal on Amazon and the company’s policies.

Changes to the US corporate income tax rate
President Trump’s proposed measures address tax code simplification and lower corporate tax rate. The proposed tax plan focuses on tax cuts for both firms and individuals with the corporate tax rate reducing from 35% to 20%. The proposal further seeks a reduction in the taxation of foreign earnings overseas once the money gets repatriated. For individuals, the tax brackets collapses from seven to three, simplifying the tax filing with tax rates at 12%, 25% and 35%. The highest individual tax rate was 39.6% and the lowest 10%. The plan also reduces or eliminates state and local tax deductions (SALT) mainly utilized in high income states.
Potential impact on company
The budget tax reforms will benefit Amazon through a decrease in tax payable using the proposed corporate tax rate. Since March 2017 Amazon collects sales tax targeting direct purchases made at the state level, but sales taxes get paid when corporations have a physical presence in a state. The tax cuts increase the corporate profits as there are lower tax expenditures. Like many other tech firms and online retailers a lower corporate tax rate is a top priority to improve competitiveness.
Amazon has one of the highest oversees holdings and the proposed cut in tax rate on repatriated profits is beneficial to Amazon. The current repatriation tax rate is 35%, and few companies repatriate large holdings because of the huge tax burden. In the latest cash filing, Amazon held $ 8.6 billion cash overseas accounting for the total $ 26 billion cash and marketable securities the company has held outside the U.S (Meisler). The tax advantages of holding cash and other securities abroad influences business decision, and the proposed tax changes are a step in the right direction.
Actions on behalf of the company
A cut in the corporate and repatriation tax rate promotes U.S. corporations and individual tax advantages to the middle and working class will likely boost consumer spending if they have higher disposable income. As lowering the corporate the tax rate will boost business activities, a larger share of the profits ought to address improving efficiency in areas where Amazon has no large presence. The tax reforms are pro-business and the positive business sentiments indicate the need for actualizing the tax proposals. Higher corporate profits result in higher corporate margins and there is money to spend on business expansion, with emphasis on higher investment and increased M & A activities.
Repatriating a share of the money and cash equivalents held overseas benefits the company as there is more cash to spend. However, other specific details on the proposed tax reform remain unclear like taxation of foreign earnings and the impact of the tax on foreign supply chains (Balakrishnan). As U.S. taxpayers, including corporations pay tax on income re...