G7 Global Deal Could Free Amazon From Tax, Experts Say | Amazon
Experts fear Amazon will escape paying significantly more taxes in some of its biggest markets unless world leaders close a major loophole in a landmark global deal.
Finance ministers in London from the G7 group of rich countries, including representatives from the UK, the US and the EU, on Saturday agreed to a landmark deal to make taxpayers pay more taxes. larger companies such as Apple, Microsoft, Google and Facebook.
The two “pillars” of the deal would require companies to pay a percentage of their profits in markets where they make large sales despite minimal company presence, as well as establish an unprecedented global minimum corporate tax.
However, a statement from G7 ministers said they envisioned the first pillar to apply only to “profits exceeding a 10% margin for the largest and most profitable multinational companies,” a restriction that could exclude Amazon.
Amazon is one of the largest companies in the world, with a market value of $ 1.6 billion (£ 1.1 billion) and sales of $ 386 billion in 2020. A Luxembourg subsidiary paid no corporate tax in 2020 on € 44bn in Europe (£ 38bn) turnover, making Amazon a prime target for politicians campaigning for changes in the global tax system.
However, its profit margin in 2020 was only 6.3%. It runs its online retail business with very low profit margins, partly because it reinvests heavily and partly to gain market share.
Richard Murphy, visiting professor of accounting at the University of Sheffield School of Management, said the 10% profit threshold was “inappropriate” due to different business models for different companies. He added that the current approaches to reporting profits in each country were “easy to play”.
“It could turn out to be a false hope unless they have the right details,” he said.
The G7 deal was meant to give impetus to talks within the larger group of G20 nations, followed by the Organization for Economic Co-operation and Development (OECD), a club of predominantly wealthy nations that has been leading tax negotiations since a decade. Campaigners said they hoped subsequent negotiations would include an approach known as “segmentation,” meaning profitable parts of companies would pay taxes themselves.
“Based on the release, Amazon is not captured,” said Paul Monaghan, managing director of the Fair Tax Foundation, which accredits businesses that do not escape tax. “If there is another layer of detail that suggests Amazon will be captured, that’s fine, but it hasn’t emerged yet.”
Janet Yellen, the US Treasury Secretary, told Reuters news agency on Saturday that she expected Facebook and Amazon to be covered by the proposal.
“It will include big profitable companies and those companies, I think, will qualify by almost any definition,” she said.
A segmentation approach would mean that a company like Amazon would pay taxes in countries like the UK on the profits of affiliates like Amazon Web Services, its lucrative web hosting arm. AWS achieved a 30% margin in 2020, according to the Fair Tax Foundation.
The U.S. tech company ended 2020 with more than $ 13.5 billion in annual operating profits on AWS annual revenue of $ 45.4 billion, up nearly 30 percent on a year.
Sources said that although the G7 has sealed a comprehensive deal, details on how to divide large business income into its constituent parts for tax purposes have yet to be agreed.
It is possible that some companies may be able to reorganize their operations to offset profits against loss-making units to stay below the 10% threshold, unless strict rules are in place.
Alex Cobham, Managing Director of Tax Justice Network, said: “If the OECD cannot guarantee that Amazon is in scope, not only will it fail to meet the public’s demand for fairness here. , but it will also offer a plan to other large multinationals to escape it. element of the reform.
Work is underway by the OECD under the banner of its inclusive framework to determine how businesses should be taxed ahead of a meeting of G20 country groups in July that is expected to ratify the G7 deal.
135 OECD countries are expected to benefit from additional tax revenues from large corporations.
George Turner, director of TaxWatch UK, a think tank, said it would be critical to determine whether tech companies would pay more taxes in the UK overall, after the UK and other countries, including France, conceded that they would remove unilateral taxes on digital services that were aimed at targeting the big guys. technology.
“It could be taking with one hand and giving with the other,” Turner said.
Facebook, the social media company, said on Saturday it believed it would pay more taxes. However, Amazon was unable to say if 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 welcome step forward in the effort to achieve this goal. We hope that discussions will continue to move forward with the broader G20 alliance and the inclusive framework. “