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Finance ministers are working on Amazon’s lucrative cloud computing business to ensure that the new G7 agreement will pay more corporate taxes at a global rate.
Although Amazon appears to exceed the profit margin set by the G7, the $ 1.6 billion tech group will have to pay more corporate tax in some of its largest markets if the new G7 global rate agreement is ratified, according to people close to it. negotiations.
Amazon didn’t start making significant profits until 2017 and they have consistently been below the 10 percent margin set by the G7.
However, the OECD in Paris, which is calling for international negotiations on the global rate, is considering a special measure to treat Amazon’s cloud computing division as a separate entity, a person said about the discussions. The measures would ensure that Amazon pays more taxes in major European countries such as France, Germany, the United Kingdom and Italy.
Amazon Web Services ’operating revenue rose 47 percent to $ 13.5 billion last year, creating a healthy operating margin of 30% by 2020, compared to its retail business percentage.
The OECD’s proposal to apply the rules to large and profitable business divisions would ensure that all US technology giants are caught up in the global G7 tax deal.
In G7 statement over the weekend the details of the moves to allow more taxes to be paid in the jurisdictions in which the companies operate were vague. The group said it would give sales countries “20 percent profit tax rights for the largest and most profitable multinational companies that exceed a 10 percent margin.”
Amazon Web Services was founded in 2006, but Amazon did not break the unit’s economic performance until 2015. Last year’s revenue grew 30 percent to $ 45.4 billion. Amazon shares have risen more than 700 percent since AWS’s performance began to be announced.
U.S. Treasury Secretary Janet Yellen said over the weekend that all U.S. technology giants would be covered. Asked about Facebook and Amazon, he said the G7 agreement “will include large, profitable companies, and those companies will, in my opinion, use almost any definition.”
Amazon declined to comment, but said the weekend’s G7 deal was a “welcome step.”
“We believe that the OECD-led process that creates a multilateral solution will help bring stability to the international tax system,” the company said.
Seamus Coffey, an economist at University College Cork and a former adviser on tax reform to the Irish government, questioned the idea that finance ministers could fabricate the way Amazon could incorporate the proposals.
“If you’re designing rules to target specific companies or individuals, I’m not sure it’s a good basis for moving forward,” Coffey said. “Retail trading is a low-margin business – what you’re doing online doesn’t change that.”
Some of the global profits of large multinationals that made sales to new countries were unlikely to achieve the large amounts proposed, tax experts said.
The multi-billion dollar Silicon Valley company would likely be left out of “Pillar 1” proposals, including Uber, Tesla, Twitter and Snap, as they continue to make losses or the pre-tax profit margin was below the 10 percent threshold last year.
More money will be raised at the “minimum 15 percent” effective rate at the global minimum tax rate on the proposed companies, if applicable in each country. In this case, most of the additional revenue will go to the US.
The U.S. will gain a lot because its multinationals have shifted their profits around the world to avoid taxes on U.S. corporations, and have left one of the lowest taxes levied on those taxes in advanced countries. The US currently earns 1% of its national income from corporate income taxes, compared to the OECD average of 3 percent.
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