This is a case that Amazon’s image should not restore. Bloomberg newspaper has revealed Amazon’s financial strategy of paying no taxes in Europe, despite the astronomical results.
In 2021, the US giant recorded a turnover of 51.3 billion euros on the old continent, an increase of 17% compared to 2020 (43.8 billion euros). Worldwide, these figures are increasing: over $470 billion (+22%) in turnover and over 33 billion (+57%) in profits. And yet, despite these records, Amazon pays no tax in Europe. Even stronger (and cynical), the company also benefited from tax credits.
Luxembourg, (tax) a little corner of heaven
In order to avoid paying the nominal euros to European countries, Amazon (like other US multinationals) has centralized its activities in a parent company based in Luxembourg. Understand that all e-commerce revenue of the Company generated in France, Germany, Italy, Spain, United Kingdom, Poland, Sweden and the Netherlands is deducted directly at the Luxembourg unit.
However, Luxembourg offers a particularly attractive tax regime to companies of this size. Above all, it authorizes complex financial arrangements and turns a blind eye to some unscrupulous practices.
Thus, in 2021, Amazon managed to post negative results in Europe (deficit of 1.16 billion euros), despite a turnover of 51.3 billion. How ? artificially amplifying the charges. Thus, Amazon was able to announce 37 billion euros spent. “Raw Materials and Consumables” as well as 15 billion “external fee”, An Amazon representative explains that these European losses are mainly due to job creation:
We have been investing heavily in creating jobs and infrastructure across Europe, over €100 billion since 2010. Corporation tax is based on profit, not income, and last year Amazon EU Sarl posted a loss as we opened our total European permanent headcount to end 200,000.
This isn’t the first time Amazon has managed to withhold the tax in dishonest ways. In 2017, Brussels denounced the tax benefits granted by Luxembourg to Amazon for the amount of 250 million euros between 2006 and 2014.
At the time, Amazon used another equally effective assembly. Its Luxembourg unit was paying huge intellectual property rights to another Luxembourgish company beyond the reach of taxes. Amazon thus evaporated most of its European profits. Another company collected these amounts and sent them to Delaware, a US tax haven. At the time, Margrethe Vestager, the European commissioner in charge of the competition, declared:
Thanks to illegal tax benefits granted by Luxembourg to Amazon, nearly three quarters of Amazon’s profits were not taxed. In other words, Amazon was able to pay four times less tax than other local companies subject to the same national tax rules. This is an illegal practice under EU state aid rules.
After this, the European Commission claimed to have owed 250 million euros to Amazon. In 2021, the Court of Justice of the European Union overturned this approval.
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