Thursday, May 26

G7 Global Deal May Leave Amazon Tax Free, Experts Say | Amazon

Experts have raised concerns that Amazon could escape paying significantly more taxes in some of its largest markets unless world leaders close a large loophole in a historic global deal.

Finance ministers in London from the G7 group of rich nations, including representatives from the UK, the US and the EU, agreed on Saturday to the landmark deal aimed at making bigger companies like Apple, Microsoft, Google and Facebook pay more taxes. .

The two “pillars” of the agreement would see companies pay a percentage of their profits in markets where they make large sales despite a minimal corporate presence, in addition to establishing an unprecedented global minimum corporate tax.

However, a statement from the G7 ministers said that they envisaged that pillar one would only apply to “profits greater than 10% margin for the largest and most profitable multinational companies”, a restriction that could rule out Amazon.

Amazon is one of the largest companies in the world, with a market value of $ 1.6 trillion (£ 1.1 trillion) and sales of $ 386 trillion in 2020. A Luxembourg subsidiary paid zero corporate tax in 2020 on sales income throughout Europe of € 44 trillion (£ 38 billion), making Amazon a prominent target for politicians campaigning for changes to the global tax system.

However, its profit margin in 2020 was only 6.3%. You run your online retail business with very low profit margins, partly because you reinvest a lot and partly to gain market share.

Richard Murphy, a visiting professor of accounting at the University of Sheffield school of management, said the 10% earnings threshold was “inappropriate” due to different business models for different companies. He added that current approaches to reporting winnings in each country were “easy to play.”

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“This could turn into a false hope unless they have the correct details,” he said.

The G7 agreement was intended to give momentum to talks in the largest group of G20 nations, followed by the Organization for Economic Cooperation and Development (OECD), a club of primarily wealthy nations that has led tax negotiations for one of each. Activists said they hoped subsequent negotiations would include an approach known as “segmentation,” meaning that profitable parts of the companies would pay taxes in their own right.

“According to the statement, Amazon is not caught,” said Paul Monaghan, executive director of the Fair Tax Foundation, which accredits companies that do not avoid taxes. “If there’s another layer of detail that suggests Amazon will be captured, that’s great, but it hasn’t come up yet.”

Janet Yellen, the US Treasury secretary, told Reuters news agency on Saturday that she hoped the proposal would cover Facebook and Amazon.

“It will include large, profitable firms and those firms, I think, will qualify by almost any definition,” he said.

A segmentation approach would mean that a company like Amazon would pay taxes in countries like the UK on the profits of subsidiaries like Amazon Web Services, its lucrative web hosting division. AWS made a 30% margin in 2020, according to the Fair Tax Foundation.

The American technology firm closed 2020 with more than $ 13.5 billion in annual operating profit from AWS annual revenue of $ 45.4 billion, almost 30% more year-over-year.

The sources said that while the G7 sealed a blanket deal, details on how to divide the revenues of large corporations into their constituent parts for tax purposes had yet to be agreed.

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Some companies may be able to readjust their operations to offset profits with losing units to stay below the 10% threshold, unless there are strict rules.

Alex Cobham, Executive Director of the Tax Justice Network, said: “If the OECD cannot guarantee that Amazon is in scope, it will not only fail to meet the public demand for fairness here, but it will also offer a plan for other large multinationals to escape. from this. element of reform “.

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The OECD is working under the banner of its inclusive framework to figure out how companies should be taxed ahead of a meeting of the G20 groups of countries in July that is expected to ratify the G7 deal.

135 countries that have joined the OECD scheme are expected to benefit from additional tax revenue from large corporations.

George Turner, head of TaxWatch UK, a think tank, said it would be vital to determine whether tech companies would pay more taxes in the UK overall, after the UK and other nations, including France, admitted that they will eliminate taxes. unilateral taxes on digital services targeting large companies. technology

“It could be taking with one hand and hitting with the other,” Turner said.

Facebook, the social media company, said Saturday that it believed it would pay more taxes. However, Amazon could not say whether it expected to pay more taxes.

An Amazon spokesperson said: “We believe that an OECD-led process that creates a multilateral solution will help bring stability to the international tax system. The G7 agreement marks a positive step forward in the effort to achieve this goal. We look forward to the discussions continuing to move forward with the broader G20 alliance and the Inclusive Framework. “

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