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The finance ministers are planning a raid on Amazon’s lucrative cloud computing business to ensure that it pays more corporate taxes under the new G7 global tax rate agreement.
Although Amazon seems to have exceeded the profit margin threshold set by G7, the US$1.6 trillion technology group will have to pay more corporate taxes in some of its largest markets. Agree on global exchange rates According to people close to the negotiations, it has been approved.
Amazon didn’t start to generate considerable profits until 2017, and it has been below the 10% profit margin threshold set by G7.
However, a person familiar with the discussion said that the OECD, which is holding international negotiations on global rates in Paris, is exploring a special measure to treat Amazon’s cloud computing department as a separate entity. This measure will ensure that Amazon pays more taxes in major European countries such as France, Germany, the United Kingdom and Italy.
Amazon Web Services’ operating income jumped 47% last year to $13.5 billion, and its operating margin in 2020 was 30%, while its retail business’s operating margin was 3%.
The OECD’s proposal to apply the rules to the company’s large for-profit sector will ensure that all U.S. technology giants are affected by the G7 global tax treaty.
In the G7 bulletin last weekend, the details of the move to allow companies to pay more taxes in the jurisdictions where they operate were vague. The organization stated that the country where the sales are located will be “given the right to tax the largest and most profitable multinational companies with 20% of their profits over 10%.”
Amazon Web Services was established in 2006, but Amazon did not announce the financial results of the division until 2015. Last year’s revenue increased by 30%, reaching 45.4 billion U.S. dollars. Since it began to disclose AWS performance, Amazon’s stock price has risen by more than 700%.
US Treasury Secretary Janet Yellen (Janet Yellen) said over the weekend that it will cover all US technology giants. When asked about Facebook and Amazon, she stated that the G7 agreement will “include large profitable companies, which I believe fit almost any definition.”
Amazon declined to comment, but described the weekend’s G7 agreement as a “welcome step forward.”
The company said: “We believe that the process of creating multilateral solutions led by the OECD will help bring stability to the international tax system.”
Seamus Coffey, an economist at University College Cork and a former adviser to the Irish government’s tax reforms, questioned the idea that the Secretary of Finance might come up with a way to include Amazon in the proposal.
“If you are designing rules for a specific or individual company, I’m not sure this is a good basis for continuing,” Coffey said. “Retail is a low-margin business-just because you do it online doesn’t change that.”
Tax experts say that the proposed new system that distributes part of the global profits of the largest multinational companies to the countries where they sell is unlikely to raise a lot of money.
Several billion-dollar Silicon Valley companies may be excluded from the “pillar one” proposal, including Uber, Tesla, Twitter, and Snap, because they are still losing money or their pre-tax profit margins It is lower than last year’s 10% threshold.
If implemented by country/region, the proposed global minimum corporate tax rate will be an effective tax rate of “at least 15%”, thereby raising more funds. In this case, most of the additional income will flow to the United States.
The United States will reap huge gains because its multinational corporations have shifted their profits around the world to avoid US corporate taxes, making it one of the lowest taxable countries of these taxes levied by developed countries. The United States currently increases its national income by 1% from the corporate profit tax, while the OECD average is 3%.
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