Governments resort to creative accounting to tax Amazon

Governments resort to creative accounting to tax Amazon

Amazon: destroyer of high streets, dehumanising employer, doorbell voyeur. And incredibly useful supplier of goods, from the essential to the frivolous.

So mighty is Jeff Bezos's company that the world's most powerful countries convened last weekend to work out how to take it down a peg or two.

The G7 tax deal aims to ensure that big tech groups pay a bit more tax in the countries where they operate. The largest global companies are caught by the new proposal if they have pre-tax profit margins above 10 per cent. Problem: Amazon doesn't.

Determined to snare the company, officials have come up with a workaround. While Amazon's retail business has a low single-digit margin in some markets and loses money in others, its cloud business Amazon Web Services “” which allows millions of customers to outsource computing tasks “” has an operating margin of almost 30 per cent. So policymakers plan to treat cloud computing units as separate companies for the purpose of the tax.

"As a tax lawyer, it's fantastic!“ said one who was tracking the process closely and anticipated plenty of complicated rules to try to enforce an "irrational“ concept with no precedent he could think of.

The principle is awkward. Amazon has