AWS could be facing serious taxes under new G7 plans

The political G7 group is planning a new global tax deal that would see Amazon Web Services (AWS) pay more taxes.

According to the Financial Times, Amazon has been accused of paying less in taxes for several years, as its profit was kept under the 10% threshold. However, its cloud computing service provider arm has been performing incredibly well, with the G7 now saying that, if looked at as a separate entity, be paying more taxes.

The report says that AWS’ operating income rose 47% in 2020, hitting a total of $13.5 billion at an operating margin of 30% - with Amazon’s retail business operating margin hovering around the 3% mark.

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When the Organisation for Economic Co-operation and Development (OECD) met in Paris recently, it discussed treating Amazon’s cloud arm as a separate entity, a person familiar with the matter told the FT. As a result, Amazon would have to pay additional taxes in France, Germany, the UK, and Italy.

AWS success

While Amazon hasn’t yet commented on the possibility of AWS being treated separately, it did welcome G7’s efforts, saying “we believe an OECD-led process that creates a multilateral solution will help bring stability to the international tax system.”

Not everyone agrees with the proposal, though. Talking to the FT, Seamus Coffey, an economist at University College Cork and former adviser to the Irish government on tax reform, said drafting rules based on the success of individual companies isn’t a “good basis to proceed”.

“Retailing is a low-margin business — just because you’re doing it online doesn’t change that,” he said.

Global leaders have been eyeing major tech companies for quite some time now, arguing that they’re dodging taxes by moving their headquarters to countries with more flexible laws. Instead, they say that companies should be paying taxes in all countries they operate in, proportionally.