Online retailer Amazon paid no corporate taxes on its activities in Europe in 2020, despite record revenue of € 43.8 billion, according to company documents viewed by The Irish Times.
The numbers fuel the scrutiny of the online retailer’s tax provisions as momentum builds for a global business tax deal after a year in which the shift to online shopping due to the pandemic helped double Amazon’s profits in the United States.
Business Depots in Luxembourg – home to the European headquarters of the internet giant that handles sales for the UK, France, Germany, Italy, the Netherlands, Poland, Spain and Sweden – showed that Amazon EU Sarl had record sales of 43.8 billion euros last year, up from 32 billion euros in 2019.
But the company did not pay any tax to the Grand Duchy because, despite a record turnover, it reported a loss of 1.2 billion euros.
The retailer was granted 56 million euros in tax credits as a result of this loss, on top of an accumulation of 2.7 billion euros in losses carried forward, which can be used to offset the costs of ‘future taxes if the company declares future profits.
The business filings required by Luxembourg are less detailed than in many countries and Amazon is only 23 pages long, which means it is difficult to establish how the loss occurred despite the huge revenue. Income is not broken down by country.
The accounts show expenditure of 31.8 billion euros on “raw materials and consumables”, 12.4 billion euros on “other external charges” and 230 million euros on “other operating charges” . Personnel costs amount to € 538 million.
A more favorable jurisdiction
“Other external expenses” include “the provision of services by related companies,” while “other operating expenses” are “primarily related to licensing agreements and royalties with related companies,” according to the accounts.
Multinational enterprises can effectively make their profits taxable in a more favorable jurisdiction through one part of the business structure by charging another for things such as use of intellectual property or interest. on debt.
An Amazon spokesperson said profits were low due to tight retail margins and investments by the company, which have risen to 78 billion euros in Europe since 2010, including in infrastructure.
“Amazon pays all the 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 euros in Europe since 2010, and a large part of this investment is in infrastructure that creates thousands of new jobs, generates significant local tax revenues and supports European small businesses. “
The company had an average of 5,262 employees during the year, according to filings, which means that it achieved a turnover of just over 8.3 million euros per employee. Deposits have been verified and approved by Ernst & Young.
The results come amid a growing international agreement on the taxation of digital giants negotiated through the Organization for Economic Co-operation and Development (OECD), after the administration of the President of the United States United Joe Biden has 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 euros in tax benefits and had been ordered to recover the amount as illegal state aid. Luxembourg has appealed the decision and the proceedings are ongoing, the amount being held in an escrow account.
“We believe that the decision of the European Commission is without merit and we will continue to defend ourselves vigorously in this matter”, indicates a note in the financial accounts of Amazon EU Sarl.
The European Commission is preparing to release new tax proposals this month and has said it will work to tackle fraud and tax problems.
“The Commission will continue to monitor Amazon’s behavior in corporate taxation,” said European Commission spokesperson Arianna Podesta.
The Fair Tax Foundation, which provided analysis of business filings, said it had calculated that Amazon had paid a 9.8% corporate tax rate on its global profits for the past 10 years and that the filings showed that the situation was “deteriorating”. .
“These numbers are mind-boggling, even for Amazon,” says Paul Monaghan, CEO of the Fair Tax Foundation. “We are seeing exponential market dominance across the globe with revenues that continue to be largely untaxed, allowing it to unfairly undermine local businesses that take a more responsible approach.”