Corporate Welfare and the Amazon Case
1:The case of Amazon in South Carolina is that of a power play by a corporate house in order to garner greater amounts of profit from the operations of business in that particular area. It is a very common scenario in world business politics and particularly in the capitalist society, where the corporate firms dominate the political scenario according to their personal requirements. In a more refined sense, this structure is known as ‘corporate welfare’. This technique is used to draw business prospects in a certain area or region by the governments. This process includes special tax benefits and grants and also several special regulations for the corporate bodies (Chen 2014).
The primary entity to get hurt in the process is the government, as by the new special regulations and tax breaks, the government loses revenues (Keisler 2016). However, it benefits the local working community as the incoming corporate firms create jobs in the area, thus driving away unemployment. The different stakeholders of the Amazon that have been involved in the process are the consumers, the government and the local community. The consumers are directly benefitted from the corporate welfare as the price without the taxes are reduced and it helps to purchase at a lower price. Secondly, the government is indirectly benefitted despite the loss of revenues as new employment opportunities increase and contribute to the overall development of the society.
2:When the turmoil with the Amazon was evident in South Carolina, Amazon was likely to cancel all the deals with the South Carolina government in order to move out of the state. At the same time, the South Carolina government realized that the moving out of Amazon would be a great loss for the local community as well as the government itself (Parilla 2017). This aspect would create the depletion of employment opportunities. These ideas let the Legislature of South Carolina to take decisive steps in order to incentivize Amazon to business in Lexington. These policies played a major role to determine the benefits of the corporate culture in the area. The mutual benefits included the generation of new workplaces which ultimately leads to the benefit of the society. At the same time, by the relaxation of taxes and several other regulations the possibilities have opened new marketing prospect as with price values of the products than the local traders (Landenberger 2012). This policy, at the end of the day decreases the price of the product which is very helpful for the common people. This helps the government to garner greater objectives and excel in the business.
Stakeholders Involved in the Amazon Case
3:The stakeholders of the Amazon, which was primarily concerned with the relocation of the company from the South Carolina, were the general community of the state. The general good of the communities, the loss of employment from the state maps were some of the concerns that were responsible for the stakes that were highly at danger.
When Amazon decided to leave South Carolina for finding better prospects, the state was marked by the highest rate of unemployment among the other states of the country. The investment of Amazon seemed to bring a new perspective of development in the work force of South Carolina. The state legislature was forced to bend itself in order to create favourable laws for the corporate body, which would bring investments and jobs to the state (Weiss and Miller 2015). The urgency of the situation led the government to hand over almost 90 acres of land and also exempted from collecting sales tax. This resulted in a major revenue for the company and at the same time for the local community, but led to the loss of the government which being another primary stakeholder, understood the benefits in the long run.
4:It is essential for a large company like Amazon to focus on its revenues and profits before taking any decisions. In the given scenario, when Amazon was facing difficulties in persuading the state government of South Carolina to understand its challenges and requirements to do business in the state, it found out that it should move out of the state in order to delay progress (LaVecchia and Mitchell 2016). Carrying a burden of potential investments can be highly devastating for a company of Amazon’s stature.
Amazon did what was needful to make the government understand the impact that its presence can make on the economy of the state. The action of withdrawal of all the job postings is indeed an abuse of power by the Amazon. However, it has to be considered that at that particular time, Amazon had no other option but to back away from a province where it was facing opposition to a newly relocated place where it could operate its business peacefully (LaVecchia and Mitchell 2016). Moreover, if the action was not taken by Amazon, then the South Carolina government would not have understood the urgency of the situation and immediately developed policies to address the issue.
5:It is important to understand the impact of Amazon in the economy of the South Carolina state. It can be argued that the deal with the Amazon has ultimately led to the loss of revenue for the state. Moreover, the presence and development of Amazon in South Carolina has also affected the local retail businesses. This has been further affected by the special tax regulations for Amazon (Landenberger 2012). However, on the positive note, it can be argues that the emergence of Amazon has created several opportunities for the government to venture upon. An addition of approximately 1250 jobs in the first year of its expansion helped South Carolina breathe a sigh of relief in matters related to unemployment (Parilla 2017). Moreover, the government also received an additional promise from Amazon of hiring more 750 professionals in the next five years.
Impact of Amazon on South Carolina’s Economy
This is evident that the policy by the South Carolina government helped in the job creation and creates the employment among the local pool of workers. The role governor Nick Halley is very important in the decision who understood the gravity of the situation and ignored many of the local oppositions in order to gain what is best for both the government and the community (Keisler 2016). Expecting more would have led Amazon to move out of the area to some other state which would only add to the damage of the economy.
6: The term ‘corporate welfare’ itself suggests that the state gives the corporates special provisions and customized laws in order to give them a boost in their business operations. Similarly, the new tax policies by South Carolina government have given the Amazon special advantages of not collecting sales taxes from the local people while selling their products (Propheter 2012). The primary advantage that the Amazon gains from this deal is that it can keep its price at a lower rate than those of the local retailers. This can be done as the Amazon products come without taxes unlike those that belong to the local retailers.
In the same process, the South Carolina has also reportedly lost around $254 million as revenue loss from the huge sale by Amazon out of the state. Moreover, it can be calculated that he state has lost more than $8.6 billion as a part of the total loss in tax revenue from Amazon (Keisler 2016). These aspects surely give Amazon an undue advantage of other retailers in the area as they have to pay the complete taxes while Amazon remains exempted from the hefty tax procedure.
7: In the present scenario Amazon still faces heavy criticism for not paying taxes and avoiding financial obligations. Of late Amazon and its CEO, Jeff Bezos have come under the direct fire of President Donald Trump, who has accused the retailing giant of not doing their social duty properly, by tactically avoiding taxes. In the present scenario, it can be seen that the South Carolina state that had once provided several exemptions and advantages to Amazon to start business in the state, has filed a lawsuit against Amazon. The state government complains about Amazon, allegedly avoiding collection of sales taxes even from merchants and third party traders, which violates the company’s clause of exclusive tax policies (Keisler 2016). According to the South Carolina government that though Amazon is exempted from collecting sales tax directly from the customers, Amazon still has the liability to collect taxes on the behalf of the businesses conducted by third party merchants through Amazon.
This allegation points out an exemplary decision by the South Carolina state legislature for the other states to follow, that corporate firms such as Amazon, needs to be put more in control gradually so as to increase the benefits of the state (LaVecchia and Mitchell 2016). However, the primary affected would be the company, which would have to increase its prices and would lose its pricing advantage over the local retailers. On the contrary, it has to be kept in mind that Amazon is one of the world’s largest companies, it has several economic factors in control, and at the same time, a businessperson of Jeff Bezos’ calibre would be able to find out new ways to maintain the revenue of the company.
References:
Chen, C., 2014. Taxation of Digital Goods and Services. NYU Ann. Surv. Am. L., 70, p.421.
Keisler, J., 2016. Property Tax Base Erosion: A South Carolina Study.
Landenberger, A., 2012. How Battles over Collection of Sales Taxes on Online Sales Will Affect Small Businesses-Especially Affiliates of Large Sellers Like Amazon. Com. Ohio St. Entrepren. Bus. LJ, 7, p.225.
LaVecchia, O. and Mitchell, S., 2016. Amazon’s Stranglehold.
Parilla, J., 2017. America’s cities compete for Amazon. Intereconomics, 52(6), pp.379-380.
Propheter, G., 2012. Political Determinants of State E?Commerce Sales Tax Policy. Politics & Policy, 40(4), pp.657-679.
Weiss, N.E. and Miller, R.S., 2015, February. The target and other financial data breaches: Frequently asked questions. In Congressional Research Service, Prepared for Members and Committees of Congress February (Vol. 4, p. 2015).
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