It’s not every day that the United States pushes through a new agreement on global tax structures with the Organization for Economic Cooperation and Development (OECD). As of Saturday 5th July, the Group of 7 (G7) countries of Canada, France, Germany, Italy, Japan, the UK and US, have agreed in principle to a global minimum corporate tax rate of 15%.
If this measure becomes adopted, it will mean that tax havens such as Bermuda, Luxembourg and the Cayman Islands can no longer operate so effectively as escape routes for corporate profits. The reform is helpfully designed in a way that it cannot be ignored or blocked by the tax havens themselves. If they don’t put up their tax rates to at least 15% percent, other countries can ‘tax back’ the difference.
The current, outdated, global taxation system has had enormous consequences. Every year, multinational companies shift an estimated $1.38 trillion in profits to tax havens, with over $245bn in direct tax revenues lost globally.
However, it appears that with a change in US president and the current coronavirus pandemic, the dynamic has shifted, and the US has finally seen the need for increased taxation. As well as proposing a 15% minimum global tax floor, President Biden is also planning to increase the US corporate tax rate from 21% to 28%.
How will this affect Amazon?
Despite increasing its European sales to a record €44bn in 2020, bizarrely Amazon is still recording a ‘loss’ of €1.2bn on its European activities. Adding insult to injury, Amazon EU Sarl, which is based in the tax haven of Luxembourg, was granted €56m in tax credits, along with €2.7bn of carried forward losses stored up, which can be used to offset any future profits.
Unfortunately, this means that it is looking unlikely that Amazon’s ‘profits’ will be captured by Biden’s 15% global minimum tax rate in its current form. According to the Guardian, Alex Cobham, chief executive of Tax Justice Network, said:
“If the OECD cannot ensure Amazon is in scope, not only will it fail to meet the public demand for fairness, it will also offer a blueprint for other major multinationals to escape this element of the reform.”
However, Janet Yellen, the US Treasury secretary, told the Reuters news agency that she expected Facebook and Amazon to be covered by the proposal, and it is possible that other proposed elements may make some difference. Until the dust settles however, our Amazon boycott campaign over its systemic tax avoidance is not going anywhere.