Source? What are the incentives? Why do the most highly valued companies in the world report much higher profit margins?

I would need a good reason to believe the executives and owners of retail businesses do not want to report higher profit margins.

The incentives are simple, profits are taxed.

To simplify, if you want to say develop new software you can call it a capital investment and pay for it with after tax money or call it operating expense and pay for it in pretax money. Guess which one is a better deal.

Regardless of how the expense is classified, the amount of additional money available for wages is still the net income figure. The owners will still want as much net income as possible. They are not going to want to waste money just so they do not have to pay 20% of it to taxes.

The trick means real net income is larger than what’s on the books/10-K filings. Misclassified investments are not wasted money, simply hiding how much money is available for other expenses.

It’s like the old trick of paying an offshore subsidiary in a tax heaven licensing fees to use your own IP with the added advantage of being able to directly profit from the use of these investments. Nobody looking at the books would think such things are actual expenses, but companies must pretend they are.