The fact that they're not so neatly distinguishable is very much at the heart of the problem. One of the main ways companies avoid tax is by making it appear that their revenue, profits, and (to a lesser extent) costs are somewhere other than where they really are. Amazon in the US is very much aware of the tax implications of hiring or locating assets in the EU, whether legitimately or as a pure dodge, and depends on the difference.
It's definitively not as simple as your example. Both Amazon and Google have staff and infrastructure in UK and other European countries. Yet they channel all their profit to lower tax countries (Luxembourg for Amazon and Ireland for Google).
In the case of Amazon, when some sales staff is in the UK (evidence coming from whistleblowers, for instance http://www.guardian.co.uk/technology/2013/may/16/amazon-whis...), when warehouses are in the UK, and Luxembourg seems to be used only for signing the official contract, how is that not tax avoidance?
The problem is that multinational corporations can devise complicated ways to avoid paying taxes in the countries where they do business by exploiting tax havens, as Apple did in Ireland.
Amazon has a huge business in the UK with offices, staff, stock and warehouses, but Amazon UK doesn't sell stuff. You are actually buying UK goods from UK warehouses with UK delivery etc but the money goes straight to Amazon EU Sarl in Luxembourg, where it has a sweetheart tax deal.
So Amazon exploits the whole UK social system of education, health services, roads, police etc etc without paying the UK government for the benefits. This is really bad for the UK and other countries except Luxembourg.
Meanwhile, Amazon EU Sarl reduces its taxes by paying Amazon Europe Holding Technologies SCS - a "non-resident" company -- hundreds of millions of euros for "intellectual property" rights that are basically untaxed (Amazon is paying itself), and the money gets spirited back to the USA.
The cost of "intellectual property" is really just a made-up number. What is Amazon charging itself vast amounts of money for when its UK website and business processes are basically the same as its American and other websites?
The whole thing may be legal but it's basically a fraud, and the EU ordered EU ordered Amazon to repay €250m in “illegal tax advantages”. Which is still chickenfeed for a company of Amazon's size and wealth.
It's highly likely that European countries will introduce a "digital tax" on turnover to stop this kind of cheating. I expect Americans will get angry if or when that happens, but in the long run, we don't have an alternative. Infrastructure is expensive, and the money should come from the people who are benefiting from it.
In the US, of course, Amazon gets tax breaks from people who want Amazon investment. New Jersey offered $7bn of tax incentives in its bid for Amazon's "second headquarters".
If companies like Amazon actually paid the taxes required by law that would be nice. Instead they have armies of people finding wholly artificial ways to legally avoid paying those taxes.
This is a smart accounting trick to work around taxes. No doubt Amazon and others do a lot of R&D. But when such comparisons are made with Europe, some details need to be understood.
> “Across Europe, we pay corporate tax amounting to hundreds of millions of euros,” an Amazon spokesperson said. In the filings, a note states that the $1 billion net tax benefit is “mainly due to the use of net losses carried forward in accordance with the tax consolidation system.”
So, buried in all this, the VAT tax is doing it's thing. They are paying taxes where fulfillment is happening - their European HQ is going to be a loss center.
> “We are investing heavily in creating jobs and infrastructure across Europe — more than 100 billion euros since 2010”, an Amazon representative said. “Corporation tax is based on profits, not revenues, and last year Amazon EU Sarl made a loss as we opened more than 50 new sites across Europe and created over 65,000 well-paid jobs, taking our total European permanent workforce to over 200,000”, the spokesperson added.
This is the same thing they did in the US: avoid posting a profit if they can help it; spend every dollar they make in growing the company; get free money by skipping taxes.
It's hard to be too mad at it - the point of tax codes being written this way is to encourage companies to spend their money hiring people and growing. But still, Amazon being able to grow rapidly because their investors don't care about negative cashflows does seem like an unfair advantage against all of the companies that do actually have to pay for things
"Amazon.com Inc.’s main European retail business reported 1.16 billion euros ($1.26 billion) of losses in 2021, which allowed the company to pay no income tax and receive 1 billion euros in tax credits, corporate filings seen by Bloomberg show."
- I'm sure Amazon did its best to pay the lowest possible tax. In EU they are taxed on profit so if they woundn't make a profit(i.e. they would reinvest) they would not be taxed.
- Amazon Europe is not Amazon US. They don't want to trade as Amazon US in Europe because they would pay even more tax(in the US).
- It's not enough that they are registered in a country with the lowest possible tax, they get a special deal there too to pay less tax than the other Luxembourg based companies/business. This is what EU is sueing them for...they've got state aid(as tax break) from Luxembourg.
In the EU we have laws against using tax incentives to lure companies to specific countries or cities. Unlike the US where Amazon is currently picking the location it's next headquarters based on what tax incentives Amazon can get.
This kind of race to the bottom is not permitted. Yet, certain EU countries have been finding ways around it to attract/retrain specific business..
In many European countries you pay taxes based on the remaining profit. So if you have small profit, you pay a very small tax on that. Companies tend to re-invest the money as much as possible, so they avoid paying a lot of taxes (which I think is a good thing in general).
The only problem appears when they do make a lot of profit, but manage to transfer it to other subsidiaries in other countries, so they pay much less profit there. I don't know if that's what Amazon did, but I'd keep in mind that while Amazon's revenues are high, their profits are usually very small.
Sure but Amazon (and all others) are not really US persons under the covers.
"In the United States, Amazon has been accused of transferring U.S. funds to the same shell company in Luxembourg, to avoid paying $234 million in U.S. taxes for 2005 and 2006. "
They pay corp tax on the profit they earn in their UK's operations. Just like every other company with operations in the UK.
What percentage of your revenue do you pay in corporate taxes? None! You only pay a percentage of profit. (extremely thin for Amazon) They base in Luxembourg to benefit from UK laws and EU regulation. The UK media and government quoting billions in revenue is meaningless. They're trying to stir you up. They would relatively nothing in corp tax relative to their other tax footprint (payroll, vat, etc) and would absolutely spend it all to avoid doing so.
Your remark sounds as if it is the company's fault to act like this.
1) The first part is exactly how the EU was designed: operate from one country, reduce your overhead. Maybe it is not Amazon's fault that they comply with the rules?
2) The second part is exactly how the Congress wanted its tax laws: if you bring money home, pay your taxes, if you don't, we are not involved. Maybe it is not Amazon's fault that they comply with the rules?
Well, do you think that IKEA and FIAT are American companies, too? Both are having their tax deals investigated as well.
You could make a good case that the European Commission choose to do this as part of an approach to reform the taxation of multinational entities within the EU. But they didn't single out Apple and Amazon specifically.
I assumed tax policy had something to do with it, the US taxes profit not revenue so companies like Amazon are financially incentivized to always reinvest in itself and grow. Many European countries have a pretty hefty ~20% VAT.
Revenue sent to a parent company abroad is deducted as an expense? I find that hard to believe.
According to this article[1], what they actually do is send the payments directly to the Luxembourg company, and Amazon UK is just classified as a delivery company. That makes sense, and frankly, it doesn't shock me. I'm from Portugal and I just bought some comics from an US company. Should they start paying Portuguese corporate taxes?
Amazon will leave the EU to find a tax haven? Like stop trading?? Because if they're tradinging here then they've not left the jurisdiction of the EU - we're talking about Amazon, whose zero-hour workers have to be supported by social care, making slightly less profit.
They reportedly paid £15M tax on profit of c.£20 Billion.
to be more clear, perhaps they could demand those taxes from Ireland, or Luxembourg where amazon is. This is like california taxing startups because they are based in Delaware.
Even Luxembourg and Ireland have non-zero corporate income tax rates. If Amazon is managing to not pay any corporate income tax, then it's corporate income must be 0 or negative, so the fact they have low corporate income taxes is irrelevant.
Amazon is Amazon UK Ltd in UK. A company registered in UK. Facebook is Facebook UK Ltd. Another company registered in the UK. They both pay taxes here. But not what it should because of accounting artifacts and weak laws.
If tax was the burden from a French "Amazon" from founding, they also could easily have a shell in Ireland or Luxembourg. I don't see this at all as France trying to tax Amazon, et all from doing business in France. I see it as a pure money grab. Truly, this isn't really a tax, but more of a tariff. It should be called as such. Maybe it's equally applied against domestic companies and wouldn't be strictly a tariff, but it's intent is most certainly as a tariff.
Edit: I don't work for Amazon, though my brother does. I also don't work at a company that has much of a stake in this fight.
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