Amazon could avoid “historic” G7 tax hikes thanks to glaring loophole

Amazon could avoid having to pay significantly more tax thanks to a glaring loophole in the “historic” global corporate tax agreement reached by G7 finance ministers.

Over the weekend finance ministers from the UK, US and nations within the EU met in Cornwall to discuss new a global tax system which would ensure the world’s largest multinational companies could no longer exploit loopholes to avoid paying tax.

A landmark agreement was reached in which participating countries backed a global minimum tax rate of at least 15 per cent, while agreeing that countries should have the right to tax a certain portion of multinationals’ profits in the locations they are generated.

The proposals could generate up to an additional $80 billion in tax revenues every year according to the Organisation for Economic Co-operation and Development (OECD), seeing companies like Microsoft, Apple, Google and Facebook pay significantly more.

READ MORE: Amazon paid zero corporation tax on European operations last year despite record sales

Despite this, experts have warned that current proposals risk enabling Amazon, a key target of the new legislation, to sidestep tax hikes altogether.

According to a communique sent by G7 ministers over the weekend, these new measures would only apply to “profit exceeding a 10 per cent margin for the largest and most profitable multinational enterprises”.

In 2020, Amazon’s profit margin was just 6.3 per cent despite posting record sales.

Amazon runs its retail business at razor-thin margins and reinvests the majority of its profits, a technique which allows it to pay relatively little in corporation tax.

According to corporate filings in Luxembourg, where Amazon’s EU headquarters is situated, the retailer raked in a whopping €44 billion (£38 billion) across its European markets last year.

Despite this Amazon’s Luxembourg unit, which handles the sales for the UK, Germany, France, Italy, Spain, Sweden and the Netherlands, made a loss of €1.2 billion (£1.04 billion) meaning it paid zero corporation tax in the country.

“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,” chief executive of Tax Justice Network Alex Cobham said.

An Amazon spokesperson said: “We believe an OECD-led process that creates a multilateral solution will help bring stability to the international tax system.

“The agreement by the G7 marks a welcome step forward in the effort to achieve this goal. We hope to see discussions continue to advance with the broader G20 and Inclusive Framework alliance.”

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