Online retail giant Amazon said Tuesday it has started declaring sales in four European countries which would now be subject to local taxes, a move that could affect other multinationals under EU investigation for possible tax avoidance.
Amazon has tax agreements in Luxembourg under which it recorded European sales and paid taxes on them in the tiny country instead of at the source. The deal had provoked howls of criticism that the Internet giant was trying to avoid taxes, and sparked a probe by the European Commission.
But the Seattle-based Internet giant said it has established local branches in Britain, Germany, Spain and Italy.
“More than two years ago we began the process of establishing local country branches of Amazon EU Sarl, our primary retail operating company in Europe,” the company said in a statement.
“As of May 1, Amazon EU Sarl is recording retail sales made to customers through these branches in the UK, Germany, Spain and Italy,” it said.
“Previously, these retail sales were recorded in Luxembourg. We are working on opening a branch for France.”
Recording its revenue in Luxembourg, a country with tax advantages for businesses, considerably lightened Amazon’s tax burden. This practice is legal, but has become more and more contested in Europe, especially at a time when countries are facing huge budget deficits.
Amazon is among several large businesses under the spotlight in Europe over tax deals in Luxembourg and elsewhere.
The European Commission is also investigating tax agreements involving US tech giant Apple in Ireland, coffee-shop chain Starbucks in the Netherlands, and Italian automaker Fiat in Luxembourg.
Ricardo Cardoso, a Commission spokesman in charge of competition issues, said Amazon’s changes “going forward do not affect the ongoing EU state aid investigation regarding the possible advantages that Amazon would have potentially received in the past through the tax ruling.”
– ‘Unbelievable admission’ –
Amazon’s announcement Tuesday “is an unbelievable admission,” said economist Thomas Piketty on French radio. He added that claims should be made for past years and that there should be a common tax on businesses in Europe.
Pressure against tax avoidance has also been mounting on the international level with the G20 and Organisation for Economic Co-operation and Development (OECD) launching a global push.
“Amazon’s decision shows that at the political level, there needs to be support for adopting, under the aegis of the G20, a strong plan against fiscal optimisation,” Pascal Saint-Amans, OECD director of fiscality told AFP.
In Germany, one of the countries where Amazon says it will start paying local taxes on sales, at least one official was sceptical.
Norbert Walter-Borjans, regional finance minister in North Rhine-Westphalia, Germany’s most populous state, said Amazon had not given details on how it would account for sales in each country, much less in each region.
European policy “still offers too many loop-holes,” said Walter-Borjans, cited by the German news agency DPA.
And in Britain, the government in March put in place what it called a “Google tax” — named after US Internet search giant which also has been criticised for tax avoidance — which puts a 25 percent tax on companies accused of diverting profits abroad.