Amazon Changes Europe Tax Practices Amidst Investigations

Amazon Changes Europe Tax Practices Amidst Investigations

Europe has just scored in its ongoing battle with American technology companies. Amazon has announced that it will start paying taxes in several European countries where its operations are considerable. Previously, it had been the practice of the company to funnel most of its sales via a low-tax haven in the form of Luxemborg, which is the home base in the area for a number of large tech companies including Amazon. This move by the ecommerce giant could pressure rival firms to take the same steps. The tax strategies of several American technology companies have been criticized by some European countries including France and Germany.

Google and other tech firms have been under fire because they use complicated structures for reducing the amount of tax they have to pay in each European country. The executive arm of the European Union, the European Commission is also investigating whether Amazon and Apple receive unfair support from the state through low tax agreements in Luxemborg and Ireland, where the European operations of the companies are based. On May 1st, Amazon announced that it had begun reporting revenue from its operations in Spain, Germany, Italy and Britain. In certain nations, the online retailer may have to pay larger tax charges as it has alerted the authorities about how it reports its revenues.

However, it may still be able to use other complex accounting practices for reducing its tax burden. A 14% increase in European revenue had been reported by Amazon in 2013, which had risen to $15 billion. According to the company’s filings, these are the latest full-year statistics available. In a statement on Sunday, Amazon said that they constantly revise their business structure for serving the customers in the best possible way. It also asserted that the changes concerning its revenue reporting practices in European operations had begun changing two years ago.

A spokesman didn’t comment when asked if change was made because of increasing pressure from European policymakers on American technology companies for paying more tax on their revenues in the 28-member European Union. There are other pressures that also plague Amazon in Europe. Local unions have held a number of strikes in Germany concerning employee treatment. Both sides have argued over the pay of Amazon’s workers and the benefits that are mandatory under German law. However, the changes to the tax arrangements of the company will pressure other tech firms in the US, which use low-tax countries such as the Netherlands and Ireland for funneling the majority of their European earnings.

Ireland has been under pressure from other European countries and announced last year that it would phase out the ‘Double Irish, a tax loophole mostly used by tech companies. This loophole can be used to make royalty payments for intellectual property by companies with operations in Ireland to a separate subsidiary registered in Ireland. Although it would be incorporated in Ireland, the subsidiary typically would have its base in a country where no corporation tax is charged. Companies such as Google have taken advantage of this loophole to reduce their taxes.

Leave a Reply

Your email address will not be published.