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Amazon to Be Covered by Global Tax Deal Despite Thin Margins

Global policy makers are crafting their international tax plan to make sure Inc. is included, even though the U.S. company’s profit margin is below the 10% proposed threshold that would give other countries rights to collect revenue. Group of Seven finance ministers on Saturday voiced support for proposed rules reallocating a portion of profits above a 10% margin to be taxed in other countries, but Amazon has estimated a global operating margin of 7.1% this year. Two people familiar with the negotiations said Amazon will be included, with the particulars of how to design the policy to capture the company still being discussed.

An Amazon spokesperson said the company “fully expects to be in the scope of any final agreement at the OECD,” referring to the eventual deal expected from the Organization for Economic Cooperation and Development referenced in the G-7 statement. Amazon shares dropped as much as 1.1% to $3,172.20, briefly hitting a session low on the news, before closing the day little changed.

Negotiators are working on the mechanism, the people said. That could include setting a threshold for individual operations that targets Amazon’s more-profitable cloud computing or advertising businesses, rather than the whole company, whose margins are weighed down by heavy investment and thin retail profits. European leaders have insisted on a way of including all the largest online companies in the tax plan. Group of 20 finance ministers are trying to reach a preliminary deal in July, followed by a more detailed agreement expected later this year.

Even with those international agreements, there would still be considerable uncertainty for how quickly these changes would come for Amazon and other multinational companies. Parts of the deal would have to be ratified and implemented with domestic tax policy in around 140 countries negotiating in talks led by the OECD.

Source: FXPro

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