Benjamin Franklin was wrong: Amazon can tax evade

Amazon_Logo“In this world nothing can be said to be certain, except death and taxes”, Benjamin Franklin said back in the 18th century. Three hundred years later in principle it maintains validity, when it comes to the former. Of course for most developed societies tax is a de facto obligation of the citizen.

Most of us we are not even asked to pay taxes; our employers keep a priori a good part of our salary, we buy anything 20% more expensive and in general we learn to live in a manner that we never think about taxes; we simply and subconsciously pay them by default. Well, this is not the case for companies, especially big ones, that are able to hire teams of experienced people to invent creative ways to pay less taxes.

Governments tolerate corporate tax evasion

Although less taxes paid by big companies mean less school renovations, the governments somehow tolerate to a certain extent this “corporate behaviour”, because with the taxes collected already some schools will be renovated anyway. However, some countries, EU member states, simply overdo it. Recently Apple, Stanbucks and Fiat Finance and Trade have been the aim of Mr Almunia and his team. The reason of this investigation is to confirm whether those multinationals are transferring prices and profits to their subsidiaries in order to benefit from taxation in EU member states that is low and also whether tax authorities are favourable.

Amazon under the magnifying glass

Currently the European Commission is investigating a 2003 deal made between Luxembourg tax authorities and Amazon, the world’s most successful e-shop. Apparently when you buy a pair of shoes online from your home in Europe, you always have a transaction between Amazon Luxembourg and yourself. The paradox is that at the end of the year Amazon Luxembourg is not making any significant profit. Now for a 14 billion euro company this would certainly attract the attention of any tax collector; if not the Luxembourgeois, the EU one for sure.

As Mr Almunia, EU Commissioner responsible for competition issues, puts it: “The Amazon subsidiary in Luxembourg records most of the group’s Europe profit. It pays a royalty to another entity in Luxembourg… “At this stage we consider the amount of this royalty, which lowered the taxable profits of Amazon, was not in line with market conditions. Luxembourg agreed to limit the amount subject to tax.”

It seems that Amazon’s CFO is a cunning one. Amazon Luxembourg is paying heavy invoices for intellectual property, sent by Amazon Europe Holding Technologies SCS (AEHT), the parent company. This of course shows in the P&L (Profit and Loss statement) of the Luxembourgeois company a very small EBITDA (earnings before tax). There you go!

Luxembourg the place to be

In principle the DG Competition is against any special treatment given by some member states to big multinationals. “It is only fair that subsidiaries of multinational companies pay their share of taxes and do not receive preferential treatment which could amount to hidden subsidies,” says Commissioner Almunia. The Commission clearly implies here that Luxembourg state is allowing this phenomenon to occur or is looking to another direction, since its deal with the American online giant.

In response to Almunia’s claim, the Finance Ministry of the small city/state replied with expected reassurance: “Luxembourg is confident that the allegations of state aid in this case are unsubstantiated and that the Commission investigation will conclude that no special tax treatment or advantage has been awarded to Amazon.” Similarly Amazon states officially that: “Amazon has received no special tax treatment from Luxembourg, we are subject to the same tax laws as other companies operating here”.

So, nobody shows any special fiscal treatment and thus nobody receives it. Can we go home now? Not yet. When Almunia and his team open an investigation they are never in a rush to close it. See Google’s case that is lasting now for 4 good years.

It seems that the aim of the Commission is to shoot against the big companies/brands. Is it because these are the only companies with a ‘creative’ CFO? Certainly not! There are two reasons instead; the first reason is that usually these companies make a hell of turnover and thus the fines to be paid are greater. This is highly needed, especially in a European economy that is lately shaky enough. The second reason is that by investigating or even fining the big, the small will hopefully become more prudent.

Millionaires are bound to tax evade

All in all, corporate tax evasion is a big issue, not only in Europe but globally. The source of evil in this case is the mere mentality of the major shareholder of a company; if you ask him, “why do you tax evade?”, the answer would be, “if you could make all this money, would you give half of it back to the state?”

While it is hard to answer the latter, as it is impossible to simulate your behaviour with a few million euros in your current account, it is reassuring to know that there are EU bodies like the Commission that monitor this activity and tries at least to put a break in the predator instincts of shareholders.

At the end of the day Amazon or any Amazon deserves every penny from its slim gross margin but definitely not at the expense of a new bridge, faculty or park that will make the rest of the taxpayers keep paying their taxes and  buying shoes online.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

daniela-runchi-jade-president__

A Sting Exclusive: “Education in Europe, fostering skills development inside and outside the school system”

EP President praises Nobel Peace Prize award to Denis Mukwege and Nadia Murad

Our children’s career aspirations have nothing in common with the jobs of the future

3 ways to fix the way we fund humanitarian relief

The Peoples are missing from EU’s monetary union

The new North America trade deal USMCA punishes German cars

Hungary must enforce its foreign bribery offence against companies, including foreign subsidiaries

Erasmus+: an expected budget of €3 billion to be invested in young Europeans and to help create European Universities in 2019

Nigeria: Armed conflict continues to uproot thousands, driving up humanitarian need

Bioethics: how to recover trust in the doctor-patient relationship

Scientists in Sweden are studying the climate-cooling effects of spruce forests

A new Europe for people, planet and prosperity for all

Artificial intelligence summit focuses on fighting hunger, climate crisis and transition to ‘smart sustainable cities’

Why embracing human rights will ensure Artificial Intelligence works for all

3 unexpected consequences of the US-China trade war

UN experts cite ‘possible exploitation’ of workers hired to clean up toxic Japanese nuclear plant

Friday’s Daily Brief: human rights in Sudan, sombre anniversaries for Rwanda and Nigeria, and fears of ‘chaos’ in Libya

Commission pledges €100 million to help Mozambique recover from cyclones Idai and Kenneth

Ebola cases rising in DR Congo, but UN health agency cites progress in community trust-building

What data dominance really means, and how countries can compete

Ukraine pays the price for lying between Russia and the EU

Our present and future tax payments usurped by banks

How bad could British healthcare get for its citizens abroad post-Brexit?

European tourism remains a strong growth factor

How solar is powering the Middle East towards renewables

One year on: EU-Canada trade agreement delivers positive results

France: New labour laws for more competitiveness

How well you age depends on what you think of old age

European Employment Forum 2013 and not European Unemployment Forum 2014

The scary EU elections result and the delayed Council’s repentance

Parliament: No consent to EU budget until €11.2 billion unpaid bills are settled

Davos participants call for digital trade deal

Now’s the time to take up cycling – here are 6 reasons why

Aid used for trade is helping developing countries diversify

What the global Internet’s stakeholders can learn from Europe’s new data law

A very good morning in European markets

EU Budget 2019 deal: EP boosts support for researchers and the young

Election 2019: New, Updated seat projection for new Parliament

Good grub: why we might be eating insects soon

The New Year 2016 will not be benevolent to Europe

Do doctors need to know their patients’ sexual orientation and gender identity?

More women and girls needed in the sciences to solve world’s biggest challenges

Three UN workers killed following Benghazi car bomb attack, as Security Council meets in emergency session, honours their ‘ultimate sacrifice’

Superconductors: the miracle materials powering an energy revolution

How to beat gender stereotypes: learn, speak up and react

Palm Oil: With Malaysia cracking down on production, what’s the alternative?

The Monetary Union drives Europe into dangerous paths, CoR demands an EMU of regional content

It’s time to ‘eliminate the scourge of conflict-related sexual violence’, urges UN chief

‘More support’ vital to put Afghanistan back on a ‘positive trajectory’ – top UN officials

“The winner is who can accelerate the transition to a new digital era”. The Sting reports live from EBS 2015: a Digital Europe 4.0

The ‘abuse of food relief in Yemen’ must end now

ECB’s Draghi favours a cheaper euro to serve all Eurozone countries

What is carbon offsetting?

UN-led Yemen ceasefire monitoring team gets ready to begin operations

Syria: Civilians caught in crossfire, UN refugee chief urges Jordan to open its border

Health & Sustainable Development Goals: it’s about doing what we can

Intervene, don’t overthink – the new mantra of systems design

Turkey: MEPs cut support by €70m due to no improvement in respect for EU values

Building climate resilience and peace, go hand in hand for Africa’s Sahel – UN forum

One-in-five suffers mental health condition in conflict zones, new UN figures reveal

More Stings?

Comments

  1. Reblogged this on Ace News Desk 2014 and commented:
    #AND2014

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s