Finance ministers have drawn a foray into Amazon’s lucrative cloud computing company to ensure it pays more corporate taxes under the new G7 deal at a global rate.
Although Amazon appears to fall outside the limit of the profit margin set by the G7, the $ 1.6-ton tech group will have to pay more corporate tax in some of its larger markets if the new G7 agreement on a global tariff is ratified, according to people close to the businesses.
Amazon did not begin to generate significant profits until 2017 and they were still below the 10 percent limit set by the G7.
However, the OECD in Paris, which convenes international negotiations on the global tariff, is studying a special measure to treat Amazon’s cloud computing division as a separate entity, said one person informed of the discussions. . The 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 revenue jumped from 47 percent to $ 13.5 billion last year, generating a full operating margin of 30 percent by 2020, compared to 3 percent for its sales activity. retail.
The OECD’s proposal on the application of the rules to large and profitable divisions of companies will ensure that all American technology giants are taken over by the global G7 tax deal.
In the G7 announcement over the weekend details of the moves to make companies pay more taxes in jurisdictions where they operate have been left vague. The group said countries where sales will be “allocated 20 percent profit tax rights that exceed a 10 percent margin for the largest and most profitable multinational companies.”
Amazon Web Services was founded in 2006 but Amazon did not disclose the unit’s financial benefits until 2015. Last year’s revenues grew 30 percent to $ 45.4 billion. Amazon’s shares have risen more than 700 percent since it began releasing AWS benefits.
Janet Yellen, secretary of the U.S. Treasury, said over the weekend that all American tech giants will be covered. Asked specifically about Facebook and Amazon, he said the G7 agreement “will include large for-profit companies, and those companies, I think, will qualify for almost any definition.”
Amazon declined to comment but described the weekend’s G7 deal as a “step forward.”
“We believe that an 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 Cork University College and a former Irish government adviser on tax reform, challenged the idea that finance ministers could come up with a way to include Amazon in the proposals.
“If you’re designing rules to target specific or individual companies, I’m not sure it’s a good basis to proceed,” Coffey said. “Retail sales are a low-margin business – just because online sales don’t change.”
The new system proposed to allocate some of the global profits of the largest multinationals to countries where they made their sales was unlikely to raise large sums, tax experts say.
Many billion-dollar companies in Silicon Valley will likely be excluded from the “Pillar 1” proposals, including Uber, Tesla, Twitter and Snap, since they still have losses, or their profit margin before the tax was below the minimum. 10 percent last year.
More money will be raised from the proposed minimum global tax rate at an effective rate of “at least 15 percent” if applied per country. In this case, the lion’s share of the additional revenue will go to the United States.
The United States will earn a lot because its multinationals have shifted profits around the world to avoid U.S. corporate taxes, leaving them with one of the lowest taxes levied on these levies by advanced nations. The United States currently raises 1 percent of national income from taxes on company profits, compared to an average of 3 percent in the OECD.