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.

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

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

A Europe that Protects: Commission calls for decisive action on security priorities

How the diaspora is helping Venezuela’s migration crisis

GSMA Mobile 360 Series – Latin America, in association with The European Sting

1 million citizens try to create a new EU institution

Can free trade deliver cheaper renewable energy? Ask Mexico

On the first day of 2019, over 395,000 babies to be born worldwide: UNICEF

Qualcomm to be the next target of EU antitrust regulators? China might be the answer

Scoring for the environment: what Mathieu Flamini’s top-flight football career taught him about leadership

CEOs in these countries are more likely to go with their gut

Pandemic mental health: the urgency of self-care

Financing fossil fuels risks a repeat of the 2008 crash. Here’s why

Changing how we produce and consume: New Circular Economy Action Plan shows the way to a climate-neutral, competitive economy of empowered consumers

Your smartphone may know more about your mental health than you

Future Forces Forum: Prague will be hosting the most important project in the field of Defence and Security

Gig workers among the hardest hit by coronavirus pandemic

EU budget: Reinforcing Europe’s cultural and creative sectors

Stepped-up efforts needed to combat pneumonia; save nearly nine million children’s lives

COVID-19: What to know about the coronavirus pandemic on 6 April

Brexit and migration dominates the debate on October’s EU summit

EU-Turkey relations: Will Turkey manage to revive the EU accession process talks?

European Semester Autumn Package: Creating an economy that works for people and the planet

Burundi: Inclusive dialogue ‘only viable option’ for resolving country’s political crisis says, UN envoy

EU Youth Conference in Amsterdam: enabling young people to engage in a diverse, connected and inclusive Europe

Africa-Europe Alliance: first projects kicked off just three months after launch

Here are 4 of the most politically charged World Cup games ever played

This chart shows the total number of COVID-19 cases and recoveries so far

Supporting the recovery: MEPs adopt budget priorities for 2021

This is how the Western Balkans will become more innovative

EU out to conquer African Union summit

Nearly half a billion people can’t find decent work; unemployment set to rise: new UN labour report

With potential to boost profits by up to 20 per cent, a woman’s place is at work, says UN labour agency

Junior Enterprises as a solution for Youth Entrepreneurship

Spring 2019 Economic Forecast: Growth continues at a more moderate pace

UN chief condemns suspected Boko Haram attacks targeting Eid al-Fitr celebrations in Nigeria

IMF: The near-term outlook for the U.S. economy is one of strong growth and job creation

Capital Markets Union: Making it easier for insurers to invest in the real economy

Germany loves a strong euro; the new Fiscal Councils can deliver despite the Greek chaos and a wider questioning of austerity

Can Greece’s devastating economy deal with the migration crisis?

Do men and women really have different leadership styles?

We can build a carbon-neutral world by 2050. Here’s how

New identity cards deliver recognition and protection for Rohingya refugees in Bangladesh

Indonesian tsunami death toll climbs over 400 as Government-led relief efforts are stepped up

These 11 EU states already meet their 2020 renewable energy targets

International Court of Justice orders Pakistan to review death penalty for Indian accused of spying

Mother of all mergers between Facebook Messenger, WhatsApp and Instagram: EU Data Privacy restrictions against Facebook’s imperialistic plans

Antibiotics are contaminating the world’s rivers

New ECB boss quizzed for the first time by Economic Affairs Committee

MEPs back update of rail passenger rights across EU

Batteries included: how better storage can transform renewable energy

Venezuelan crisis: MEPs reaffirm their support for Juan Guaidó

‘Reasons to hope’ for sustainable peace in Central African Republic – UN Mission chief

Four million Syrian children have only known war since birth: UNICEF

Germany fears that Americans and Russians want to partition Europe again

Radio still a powerful worldwide tool for ‘dialogue, tolerance and peace’: Guterres

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

Stronger partnerships with post-conflict countries needed to ensure ‘path towards durable peace’: UN chief

I accidentally went viral on TikTok. I learned we failed our youngest generation.

Code of Practice against disinformation: Commission calls on signatories to intensify their efforts

To retire at 65, American millennials need to save almost half their paycheck

New EU rules cut red tape for citizens living or working in another Member State as of tomorrow

More Stings?

Advertising

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