G7 to call on Amazon in new global tax plan
Finance ministers are planning a raid on Amazon’s lucrative cloud computing business to ensure it pays more corporate tax under the G7’s new global rate deal.
Although Amazon appears to be outside the profit margin threshold set by the G7, the $ 1.6 billion tech group will have to pay more corporate tax in some of its larger markets if the government’s new deal. G7 on a global rate is ratified, according to people familiar with the negotiations.
Amazon didn’t start generating significant profits until 2017, and they’ve consistently been below the 10 percent margin threshold set by the G7.
However, the OECD in Paris, which is convening international negotiations on the global rate, is considering a special move to treat Amazon’s cloud computing division as a separate entity, a person briefed on the discussions said. The measure would ensure that Amazon pays more taxes in major European countries like France, Germany, the UK and Italy.
Amazon Web Services operating profit jumped 47% to $ 13.5 billion last year, generating a healthy operating margin of 30% in 2020, from 3% for its retail business .
The OECD’s proposal to apply the rules to large and profitable business divisions would ensure that all US tech giants are covered by the G7 global tax deal.
In the G7 statement over the weekend, details of measures to force companies to pay more taxes in the jurisdictions in which they operate were left unclear. The group said countries where the sales are made would be “given tax rights of 20 percent of profits exceeding a 10 percent margin for the largest and most profitable multinational companies.”
Amazon Web Services was founded in 2006, but Amazon didn’t disclose the unit’s financial performance until 2015. Revenue last year rose 30% to $ 45.4 billion. Amazon shares have risen more than 700% since it started reporting AWS performance.
Janet Yellen, US Secretary of the Treasury, signaled this weekend that all of the US tech giants will be covered. Asked specifically about Facebook and Amazon, she said the G7 deal “will include big profitable companies, and those companies, I think, will qualify by almost any definition.”
Amazon declined to comment but described the weekend’s G7 deal as a “welcome step forward.”
“We believe that an OECD-led process that creates a multilateral solution will help stabilize the international tax system,” the company said.
Seamus Coffey, an economist at University College Cork and a former Irish government adviser on tax reform, took issue with the idea that finance ministers could fabricate a way to include Amazon in the proposals.
“If you’re designing rules to target specific or individual businesses, I’m not sure that’s a good basis to continue on,” Coffey said. “Retailing is a low-margin business – just because you do it online doesn’t change that. “
The proposed new system of allocating a portion of the global profits of the largest multinationals to the countries where they made their sales was not likely to generate significant sums, tax experts said.
Several multibillion-dollar Silicon Valley companies would likely be excluded from ‘pillar 1’ proposals, including Uber, Tesla, Twitter and Snap, because they remain in deficit, or their pre-tax profit margin was below the 10% threshold. ‘last year.
More money will be collected by the proposed global minimum corporate tax rate at an effective rate of “at least 15 percent” if applied country by country. In this case, the lion’s share of the additional revenue will go to the United States.
The United States has a lot to gain because its multinationals have shifted their profits around the world to avoid U.S. corporate taxes, leaving them with one of the lowest tax revenues from these advanced country levies. The United States currently collects 1 percent of its national income through corporate income taxes, compared to an OECD average of 3 percent.