Amazon does not pay corporate tax in Europe despite a turnover of 44 billion euros

Online retailer Amazon paid no corporation tax on its operations in Europe in 2020 despite posting record sales of 43.8 billion euros, according to company filings seen by The Irish Times.

The figures fuel a review of the internet retailer’s tax provisions as momentum builds for a global deal on business taxation after a year in which the shift to online shopping due to the pandemic has doubled Amazon’s profits in the United States.

Corporate depots in Luxembourg – home to the internet giant’s European headquarters which handles sales for the UK, France, Germany, Italy, the Netherlands, Poland, Spain and Sweden – showed that Amazon EU Sarl recorded record sales of €43.8 billion last year, compared to €32 billion in 2019.

But the company did not pay any tax in the Grand Duchy because, despite the record turnover, it recorded a loss of 1.2 billion euros.

The retailer got €56m in tax credits due to the loss, adding to a €2.7bn accumulation of carried forward losses, which can be used to offset future tax bills if the company declares profits in the future.

The business documents required by Luxembourg are less detailed than in many countries, and Amazon is only 23 pages long, meaning it’s difficult to establish how the loss occurred despite the large revenue. Revenue is not broken down by country.

The accounts show charges of 31.8 billion euros on “raw materials and consumables”, 12.4 billion euros on “other external charges” and 230 million euros on “other exploitation”. Personnel costs amounted to 538 million euros.

A more favorable jurisdiction

“Other external expenses” include “provision of services from related companies” while “other operating expenses” are “mainly related to license agreements and royalties with related companies”, according to the accounts.

Multinational companies can effectively shift profits to be taxable in a more favorable jurisdiction through one part of the corporate structure charging another for things such as the use of intellectual property or interest on the debt.

An Amazon spokesperson said profits were weak due to tight retail margins and the company’s investments of 78 billion euros in Europe since 2010, including in infrastructure.

“Amazon pays all required taxes in each country where we operate,” the spokesperson said. “Corporate tax is based on profits, not income, and our profits have remained low given our heavy investments and the fact that retail is a highly competitive, low-margin business.

“We have invested well over €78 billion in Europe since 2010, and a large part of this investment is in infrastructure that creates many thousands of new jobs, generates significant local tax revenue and supports small European businesses.”

The company had an average of 5,262 employees during the financial year, according to filings, meaning it achieved revenue of just over 8.3 million euros per employee. The filings have been audited and signed by Ernst & Young.

The results come amid a surge in an international agreement on the taxation of digital giants negotiated through the Organization for Economic Co-operation and Development (OECD), after the administration of US President Joe Biden released proposals for digital taxation and a global minimum rate. .

Illegal state aid

In 2017, the European Commission found that Luxembourg had offered Amazon €250 million in tax advantages and was ordered to recover the sum as illegal state aid. Luxembourg has appealed the decision and the procedure is ongoing, with the sum being held in an escrow account.

“We believe the European Commission’s decision is without merit and we will continue to vigorously defend ourselves in this matter,” read a note in the financial accounts of Amazon EU Sarl.

The European Commission is preparing to publish new tax proposals this month and has said it will tackle fraud and tax issues.

“The Commission will continue to monitor Amazon’s corporate tax behavior,” European Commission spokeswoman Arianna Podesta said.

The Fair Tax Foundation, which provided an analysis of corporate filings, said it calculated that Amazon had paid a 9.8% corporate tax rate on its global profits over the past 10 years and that the statements showed that the situation was “deteriorating”. .

“These numbers are mind-boggling, even for Amazon,” said Fair Tax Foundation chief executive Paul Monaghan. “We are seeing an exponential acceleration in market dominance across the world thanks to income that continues to be largely untaxed, allowing it to unfairly undermine local businesses that take a more responsible approach.”