Seven major countries (G7) have agreed to prevent large companies from evading taxes, including setting the world’s lowest corporate tax rate, but Amazon, among major technology companies, has room to avoid regulations.
As a result, some point out that loopholes need to be corrected in the process of discussing detailed issues, the British daily Guardian reported on the 6th (local time).
Treasury ministers from seven major countries held a meeting in London on the 4th and 5th to agree to set the world’s lowest corporate tax rate at 15 percent. In addition, in the case of “large and high-profit multinational companies with a profit ratio of more than 10 percent,” it will ensure that at least 20% of profits can be taxed in the country where sales originated.
The main purpose of G7 agreement is to prevent tax avoidance by large multinational companies, including Apple, Google, and Facebook, but Amazon has much room to escape without paying taxes to the countries where sales occur, the newspaper pointed out.
Amazon is a huge company with sales of $386 billion (about 425 trillion won) and a market capitalization of $1.6 trillion (about 1760 trillion won) last year, but its profit margin was only 6.3%. The Guardian pointed out that one of the reasons for the low profit ratio is that it reinvested a lot of profits to expand its market share in online distribution, its main industry.
For this reason, if the agreement is implemented as it is, Amazon will not pay additional taxes on profits generated from countries outside the United States. The company’s Luxembourg subsidiary made 44 billion euros (about 59 trillion won) in sales in Europe last year, but did not pay a single penny in corporate taxes, the newspaper said.
Richard Murphy, a professor at the School of Business at Sheffield University in England, said, “It is not appropriate to standardize the tax base by country at 10 percent profit because each company has a different business model. This approach like this is easy for companies to avoid.”
Experts pointed out that taxing by business sector is necessary to prevent loopholes. The UK’s Fair Taxation Foundation pointed out that Amazon’s cloud computing business, Amazon Web Services, had a profit ratio of 30 percent last year, and that countries, including the UK, could face considerable taxes if taxed by sector.
Experts point out that the taxation method by business sector also has the effect of preventing other companies from avoiding taxation. Taxation by sector is essential to prevent many companies from turning profits from profitable sectors into deficit sectors and lowering the overall profit ratio below 10%. Alex Cobum, CEO of the Tax Justice Network, said, “If Amazon is not included in the tax reform plan, it will not meet the public’s fair taxation needs, but it will also provide other companies with a blueprint to avoid regulations.”
The Organization for Economic Cooperation and Development (OECD) is working on detailed taxation plans with 135 countries participating around the world, and aims to finalize the plan before the G20 discusses the agreement next month.