Tesla will not pay any US federal tax for 2021 despite record net income for the year. The company claims all its income came from foreign markets and reported losses in the US.
Last year was by far the most profitable for Tesla as the company recorded net income of $5.5 billion, and adjusted income of $7.6 billion.
In its latest annual financial filing with the Securities and Exchange Commission, submitted earlier this month, Tesla said that the company’s US operations recorded a loss of $130 million in 2021 and that all of its pre-tax net income stemmed from overseas operations.
One explanation could be that Tesla structures its global operations so that income is reported from overseas subsidiaries often registered in tax havens like Bermuda, the Caymans or Luxembourg, while US operations report little or no taxable income.
“It’s very common. It’s almost malpractice not to do that. That defies common sense, but it does not defy the US tax code,” Martin Sullivan, chief economist for Tax Analysts, told CNN.
Tesla didn’t disclose in the filing with the SEC which countries it reported the 2021 profits from.
“Tesla and other giant corporations have long used scams and loopholes to help them get out of paying taxes – that has to stop,” Senator Elizabeth Warren, a frequent critic of company CEO Elon Musk, said to CNN.
Another explanation is that Tesla has indeed been losing money in the US, according to Gordon Johnson, CEO of the equity research firm GLJ Research and a Tesla critic. He pointed out that the company was losing money overall for years until it opened a Gigafactory in Shanghai in 2019 where product costs are lower than in the US.
Unlike his company, Elon Musk says he plans to pay more tax than anyone ever has in the US. His tax bill for last year is expected to be about $11 billion.
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