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Last weekend, finance ministers from the G7, the leading industrialised countries, reached a “historic agreement” on a minimum tax rate for multinationals. However, a loophole in the agreement could allow Amazon to avoid the tax after all.
Minimum of 15 per cent
Over the weekend, finance ministers from the G7 (France, the UK, Germany, Italy, Japan, Canada and the US) met in Cornwall to discuss a new global tax system that would ensure that the world’s largest multinational corporations could no longer use loopholes for evading taxes.
A ground-breaking agreement was reached in which the participating countries committed to a minimum global tax rate of at least 15 per cent. Moreover, European countries will have more opportunities to tax large multinationals in the country where the turnover is generated, and not only in the country of their headquarters. Currently, many large companies have their headquarters in countries with low tax rates.
According to the Organisation for Economic Co-operation and Development (OECD), the proposed measures could generate up to 80 billion dollars (nearly 66 billion euros) in additional tax revenue annually. This would entail that companies such as Microsoft, Apple, Google and Facebook would pay significantly more.
Profit margin
Yet Amazon, one of the main targets of the new legislation, could dodge the bullet, writes The Guardian. After all, the new measures would only apply to multinationals with a profit margin of at least 10 per cent.
Last year, Amazon’s profit margin was only 6.3 per cent. The American e-commerce giant may have posted record-breaking sales but the company runs its retail operations on razor-thin margins and reinvests most of its profits, which means it has to pay relatively low corporate taxes.
“If the OECD cannot ensure Amazon is in scope, not only will it fail to meet the public demand for fairness here, it will also offer a blueprint for other major multinationals to escape this element of the reform,” said Alex Cobham, chief executive of the Tax Justice Network.
