Amazon, an obstacle to the financial "Premier League"

The US-led effort to reach a global agreement on taxing overseas profits for big tech companies is being hampered by one company in particular: Amazon.com.

The Treasury proposal, which was circulated to other governments earlier this month and seen by Bloomberg, would subject nearly 100 of the largest and most profitable companies to higher taxes in the countries where they have users and consumers, as opposed to the countries in which they reside.

The idea is that the new rules apply to any large company that exceeds certain numbers, yet to be determined, for its annual revenue and profit margin. Before Treasury Secretary Janet Yellen this month accelerated efforts that the Trump administration had opposed, the talks focused on digital and “consumer-oriented” businesses, and the tariffs countries faced. Difficulties in reaching an agreement.

The global talks, led by the Organization for Economic Cooperation and Development (OECD), are trying to address many countries’ concerns that tech giants and other multinationals are not subject to adequate taxes. The Organization for Economic Co-operation and Development (OECD) efforts are seeking to replace taxes on digital services that a growing number of countries are implementing to generate more revenue from companies such as Google, Facebook and Amazon.

But Amazon’s unusual position as a low-margin tech giant has become a sticking point in the negotiations. Seattle-based Amazon recently reported a global operating margin of 5.5% on its business, while Facebook’s margin is 45.5% and Google’s parent alphabet is 27.5%.

The US proposal will only include “the largest and most profitable” multinational companies. No exact figures have been established, but profit and profit thresholds should be set to cover only 100 companies.

A European Commission spokesperson said Tuesday that while the US proposal offers a “promising opportunity” to move toward a deal, “we must not forget the initial political rationale: to tax the digital economy more equitably. It is imperative that any proposed proposal addresses this challenge.” A French Finance Ministry official said they are still studying the US proposal to determine whether it will cover all multinational digital companies.

However, the United States has long opposed a deal that addresses a specific part of the economy, such as rules that only affect digital companies, and the Treasury’s new proposal aims to make the scope of the plan more quantitative and objective.

US officials know other finance ministries are trying to bring companies with lower margin at break-even, according to people familiar with the matter, who said Amazon was the target of these discussions. People who requested anonymity said that the United States continues to oppose efforts to target one company or sector.

The U.S. Treasury Department and the Paris-based Organization for Economic Cooperation and Development declined to comment. Amazon did not respond to a request for comment.