The decision reached by the G7 finance ministers on global companies’ taxes may provide an escape hatch for Amazon, and perhaps others.
In particular, Amazon could find its way around paying a dramatic increase, according to The Guardian, because its business model brings a profit margin of below 10 percent – the trigger point for a key part of the G7 agreements.
Representatives from the G7 sought to move toward solving the sticky taxation situation, announcing Saturday a two-path plan that affects taxes on the world’s top tech companies such as Apple, Facebook, Amazon and Google’s parent company, Alphabet.
We should have known there would be significant loophole opportunities for the business giants, given several statements in the wake of the announcement.
Reaction on Saturday included Facebook saying it “welcomes” the new format, and a Google spokesperson told Reuters the company “strongly supports” the agreement.
A target element is profit margin for these companies, with anything above 10 percent landing in the new zone — above that margin, 20 percent of declared profit would be subject to taxes in the actual countries in which those businesses make sales.
But Amazon’s profit margin is well below that line, employing aggressive growth and reinvestment, Vox reported.
According to The Guardian, Amazon’s profit margin in 2020 was 6.3 percent.
Though many are skeptical, one expert seems convinced the plan has merit.
U.S. Treasury Secretary Janet Yellen said Saturday that big tech won’t be able to circumvent the new taxes.
“It will include large profitable firms and those firms, I believe, will qualify by almost any definition,” she said, according to Reuters.