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(English) Amazon to Stop Funneling European Sales Through Low-Tax Haven


MAY 24, 2015

The New York Times

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

In a move that could put pressure on its rivals to follow suit, Amazon will start paying taxes in a number of European countries 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 countries, including Germany and France, have criticized the tax strategies of some American tech companies, including Google, which use complicated structures that sharply reduce the amount of tax they pay in individual European countries.

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

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 may become liable for larger tax charges in certain nations, though it may 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, or $15 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 policy makers on American tech companies to pay more tax on their operations in the 28-member European Union.

The news of changes to Amazon’s tax structure was reported last week 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 United States that funnel the majority of their European revenue through low-tax countries like Ireland and the Netherlands.

In Britain, George Osborne, the country’s finance minister, 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.

And in response to mounting criticism from other European countries, Ireland announced late last year that it would phase out a tax loopholecalled 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 2015, and will be stopped entirely by the end of the decade.

Yet, despite the growing clampdown on tax structures used by American tech companies and others, analysts say that European countries are still vying to attract international companies through low-tax policies.

Britain, Ireland and the Netherlands have already created new policies that allow companies to apply for a lower tax rate on profits that result from certain patents that are held locally.

The European Commission, however, is currently reviewing the legality of these so-called patent boxes.

Correction: May 25, 2015
Because of an editing error, an earlier version of this article misstated the nature of a battle over tech companies’ taxes in Europe. The battle is between European countries and American tech companies, not between European tech companies and their American counterparts.

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