OECD to Include Amazon in Global Corporate Taxation Scope

Discussion Underway on Taxation Proposal Based on Amazon Web Services with 30% Operating Profit Margin

[Photo by AP Yonhap News]

[Asia Economy Reporter Park Byung-hee] The Organisation for Economic Co-operation and Development (OECD), which is leading discussions on the global minimum corporate tax rate, is reportedly preparing measures to include Amazon in the scope of taxation.

The controversy surrounding Amazon arose due to the 10% profit margin threshold revealed in the agreement from the G7 finance ministers' meeting held in London, UK, on the 4th and 5th. At that time, the G7 finance ministers agreed on a global minimum corporate tax rate of 15% and also agreed on a plan to tax at least 20% of the profit exceeding a 10% margin from multinational corporations in the countries where the revenue is generated.

Amazon became a subject of controversy because its profit margin falls short of 10%. According to Bloomberg, Amazon's operating profit margin this year is expected to be only 7.1%.

Accordingly, the OECD is reportedly preparing a separate plan to include Amazon in the taxation scope. The most likely plan currently under discussion is to recognize the business units generating significant profits within Amazon as separate entities and tax them based on that. In Amazon's case, Amazon Web Services (AWS), which handles the cloud business unit, is the target. AWS, led by Andy Jassy, Amazon's cash cow and Jeff Bezos's successor, posted an operating profit of $13.5 billion last year, a 47% increase from the previous year, with an operating profit margin reaching 30%.

An OECD official stated that measures are being prepared to include all major US IT companies, including Amazon, in the scope of taxation. US Treasury Secretary Janet Yellen is also reported to have agreed to this at the G7 meeting.

Bloomberg reported that regarding the global corporate tax rate discussions, the finance ministers of the Group of Twenty (G20) are expected to reach an agreement in July, and a more detailed agreement including the Amazon taxation plan is anticipated in the second half of the year.

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