business

Amazon may prove exception to global tax rules

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The Group of Seven wealthy nations may have endorsed a plan to ensure the world's biggest companies pay a minimum global tax rate, but U.S. tech behemoth Amazon may escape it.

The landmark deal is supposed to help put an end to top multinationals shopping for countries with low corporate tax rates in which to book their profits instead of paying where they conduct their business.

By introducing a minimum tax rate of 15 percent without exceptions proponents of the plan hope multinationals will have less incentive to go through complex efforts to shift where they pay taxes.

There is a second "pillar" in the plan: countries would be allowed to tax a share of the profits of the most profitable companies in the world, regardless of where they are based.

The caveat: it applies only to companies whose profit margins exceed 10 percent.

That would affect about 100 companies, including U.S. tech giants such as Facebook and Google, but as some experts have pointed out, not Amazon.

Despite Amazon's colossal footprint and market capitalization of more than $1 trillion, its profit margin last year amounted to just 6.3 percent.

It did not take long before the first brickbats were aimed at the deal by Britain's Fair Tax Foundation.

"Just one more reason for the G20 to revisit and embolden the package" when the group of the world's top industrialized and emerging nations look to sign off on the arrangement next month, the group said on Twitter.

A source close to the talks confirmed that Amazon overall would not fall under the provisions allowing countries to tax part of its profits.

However its cloud computing arm, Amazon Web Services (AWS), "turns in profits of around 30 percent" and "it will therefore be taxed on this segment of activity" by different nations, said the source.

There is no other "exception" or loophole in the provisions, the source added.

Amazon, which has been surfing an e-commerce wave since COVID-19 hammered bricks and mortar retail, more than tripled its first quarter net profit for this year to $8.1 billion.

AWS meanwhile saw its quarterly sales soar 32 percent to $13.5 billion.

Like fellow online giant Facebook, Amazon welcomed the G7 accord.

In a statement to AFP, the company called it "a welcome step forward" which will "help bring stability to the international tax system."

Amazon's country director for Italy and Spain, Mariangela Marseglia, declared herself "very happy" with the deal reached by finance ministers and central bankers of the Group of Seven wealthy states over the weekend.

She said it adopts "a uniform approach to the taxation of multinational companies (which) is what we have been trying to pursue for a long time."

Amazon has long supported countries working together on corporate taxation, she said, in order to reduce the risk of double taxation.

That may be an allusion to taxes imposed unilaterally by countries including France, Italy, Spain and Britain which will fall away once a global agreement takes effect.

Amazon has been variously targeted by the United States and several European countries over its tax optimization arrangements involving sophisticated accounting schemes which exploit differences in different jurisdictions,

Essentially this involves booking profits in countries with relatively low tax levels while conversely declaring losses where tax levels are higher.

Such measures allow Amazon to considerably lower its tax bill.

Amazon says it is now waiting on the details of a global accord.

The reform now goes to a G20 finance ministers meeting in July before moving to negotiations between 139 countries overseen by the Organization for Economic Co-operation and Development.

© 2021 AFP

©2021 GPlusMedia Inc.

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Amazon's country director for Italy and Spain, Mariangela Marseglia, declared herself "very happy" with the deal reached by finance ministers and central bankers of the Group of Seven wealthy states over the weekend.

She said it adopts "a uniform approach to the taxation of multinational companies (which) is what we have been trying to pursue for a long time."

If corporations are happy about the new tax plan, this is the first bad sign. It usually means they were involved in the drafting of the legislation and there are some exclusive loopholes and marginalia that will increase their oligopoly and protect their profit margins.

3 ( +6 / -3 )

When did we vote for this?

-4 ( +1 / -5 )

Just wow, unbelievable, the one company that needs to be scrutinized gets a pass

-2 ( +2 / -4 )

When did we vote for this?

Articles regarding this tax never seem to mention the fact that legislatures of a lot of nations are going to have to approve these new taxes and their national executives have to sigh off on them for them to become law. It is not guaranteed to happen. Some nations surely will but what the problem will be a bunch of self governing British possessions that have become tax havens such as Bermuda and Gibraltar, that are under no obligation to adopt these new tax rules as their own law.

0 ( +2 / -2 )

Just wow, unbelievable, the one company that needs to be scrutinized gets a pass

Companies should be taxed by each nation based on the profits they earn in that nation selling goods or provide a service. This way each nation can tax the business conducted in their nation regardless of where the company puts their headquarters. Companies would be required to publish their revenues and expenses for each market so they can be taxed accordingly.

2 ( +4 / -2 )

Well, does that at least mean we will get free shipping from Amazon USA?

-4 ( +0 / -4 )

the big companies are happy with it because the governments will always battle each other to attract them. With tax exemptions or subsidies compensating potential taxes, so the level of the tax does not matter. Wetter you do not pay 5%, 15% or 30 % , the end result is zero tax

-1 ( +2 / -3 )

Shifting money between subsidiaries in a corporation isn't hard. Just have certain tax-haven location charge for their required services sufficiently to mandate the transfer of money out of high-tax countries. Happens all the time.

Corporate tax attorneys who don't minimize the taxes paid world-wide are failing the stock holders. If the BoD and C-Suite don't hire competent corporate tax attorneys, then they will be fired too.

That's the corporate mandate. If countries don't like this, then laws to prevent it must be passed. Then there will be 2 types of companies. Those who pay their fair share and those who relocate to tax havens to keep the game going. The tax haven countries need to be strongly encouraged to choose to follow the same rules by the larger countries under threat of sanctions. Kill off any direct trade to those tax havens, no direct shipping or flights - perhaps a surcharge for access to European and US banks too to cover the believed taxes not being paid.

-1 ( +1 / -2 )

Time to get the VP to look into the root causes of tax evasion.

-1 ( +0 / -1 )

Saw an image of a truck today that had a picture of a laughing Jeff Bezos and the words "Tax me if you can".

0 ( +0 / -0 )

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