Amazon stock nosedives over rumors of govt action to check tax collection

Amazon’s (AMZN) phenomenal growth has been a cause of perennial worry for conventional retailers, and the last decade witnessed most of them revisiting their business strategies. What followed was a slew of changes in the business dynamics, with the spotlight on consolidation.

All along, the e-commerce giant continued to eat into the market share of its competitors, prompting retail majors like Walmart (WMT) and Home Depot (HD) to think out of the box. A close look at their capital spending shows a major chunk of their investment went into developing the online platforms.

Amazon’s business thrives on the internet, a domain that very often operates on its own terms. So, it’s natural that the ripples of the regulatory clampdown in the virtual space reached Amazon also. Amazon’s shares lost more than 3% in the Nasdaq Stock Exchange on Wednesday, following unconfirmed reports that the Trump administration is taking steps to bring changes to the tax collection regimen of the company, and that of all other e-commerce firms. The sharpest loss in more than a year came on a day when all major tech stocks traded lower.

On the face of it, the latest development gives the impression that the alleged anomalies on the part of Amazon — in collecting sales tax on goods sold online — could have been averted if a proper regulation was already in place.

Amazon’s shares dropped sharply on Wednesday, along with other major tech stocks that traded lower

President Trump had earlier cautioned the company over the perils of being lax in collecting tax. A message posted by the President on Twitter last year reads, “Amazon is doing great damage to tax-paying retailers. Towns, cities and states throughout the US are being hurt – many jobs being lost!”

Underscoring Trump’s views on the matter, a senior diplomat had said the government would soon take ‘a position’ on the company’s tax policy. While hailing the corrective measures adopted by Amazon on the tax front, he expressed concern over company’s ‘third-party’ marketplace where external entities sell products on the Amazon website.

According to sources close to the matter, empathizing with those affected by Amazon’s online business prowess and its impact on the brick-and-mortar business, Trump is pushing for a revision of the company’s tax treatment.

Amazon’s net profit more than doubled to $1.9 billion in the fourth quarter, supported by a 38% growth in revenues.