Tue, May 26, 2015 - Page 15 News List

Amazon to stop funneling Europe sales via tax haven

PAYING TAX DUES:The online retailer has started reporting revenues from its operations in Germany, the UK, Italy and Spain, making it liable to higher taxes

NY Times News Service

In the continuing battle between European and US tech companies, score one for Europe.

In a move that could put pressure on its rivals to follow suit, Amazon.com Inc plans to start paying taxes in a number of European nations where it has large operations, instead of funneling nearly all its sales through Luxembourg, a low-tax haven that is the home base in the region for Amazon and many other large tech companies.

Several European nations, including Germany and France, have criticized the tax strategies of some US tech companies, including Google, which use complicated structures that sharply reduce the amount of tax they pay in individual European markets.

The European Commission is also investigating whether Apple Inc and Amazon receive unfair state support through low-tax agreements in Ireland and Luxembourg respectively, where the companies run their European operations.

REVENUE REPORTING

On May 1, Amazon said that it had started reporting revenue from its operations in Britain, Germany, Italy and Spain. By altering how it reports its revenue, the online retailer might become liable for larger tax charges in certain nations, although it might still be able to reduce its tax burden through other complex accounting practices.

Amazon reported a 14 percent rise in European revenue, to 13.6 billion euros (US$14.92 billion), in 2013 (the latest full-year figures available), according to company filings.

“We regularly review our business structure to ensure that we are able to best serve our customers,” Amazon said in a statement on Sunday.

The company added that the changes to how it reported revenue from its European operations had started more than two years ago.

A spokesman declined to say whether the changes were because of growing pressure from European policymakers on US tech companies to pay more tax on their operations in the 28-member EU.

The news of changes to Amazon’s tax structure was reported this month by the Guardian.

Amazon faces other pressures in Europe, too. In Germany, local unions have held a series of strikes over employee treatment. Both sides have clashed over how much Amazon’s workers should be paid and other benefits mandated under German law.

The changes to the company’s tax arrangements, however, are likely to put pressure on other tech companies in the US that funnel the majority of their European revenue through low-tax countries like Ireland and the Netherlands.

In Britain, British Chancellor of the Exchequer George Osborne has championed a so-called “Google Tax” that imposes a 25 percent tax on the local profits of international companies that are perceived to route money unfairly overseas. The new policy came into effect last month.

‘DOUBLE IRISH’

And in response to mounting criticism from other European nations, Ireland announced late last year that it would phase out a tax loophole called the “Double Irish” that would often be used by tech companies. The structure allows corporations with operations in Ireland to make royalty payments for intellectual property to a separate Irish-registered subsidiary. That subsidiary, though incorporated in Ireland, typically has its home in a country that has no corporate income tax.

The Double Irish policy has allowed companies like Google to limit how much tax they pay on their international operations. The policy was phased out for new companies at the beginning of the year and is to be stopped entirely by the end of the decade.

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