E-commerce giant Amazon is to start reporting its figures on a country-by-country basis, which will lead to increased tax bills in key markets.
Amazon has long been criticized for the small amount of tax it pays in Europe. Now the European Union has put pressure on the company to change the way it books revenue from sales in member countries, writes Geoffrey Smith for Fortune.
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Amazon’s revenue to be reported through local subsidiaries
The Wall Street Journal was originally responsible for reporting the fact that Amazon will now starting booking revenue through national branches in four of the five largest EU markets: the United Kingdom, Germany, Italy and Spain. The original report cited “a person familiar with the matter,” but the change was confirmed by a spokesman from May 1 onward.
Previously Amazon booked a huge proportion of its sales in the EU through a subsidiary registered in Luxembourg. The company has an arrangement with its government which means it only pays a tiny percentage of the taxes which would be due if these sales were booked through local subsidiaries.
Pressure from the UK increased after Amazon paid just $3.6 million of tax on $6 billion in sales in the country in 2012. Campaigners took to the streets to protest about the tiny tax bills of major corporations, and unease over tax practices has continued to grow.
Growing regulatory pressure on multinationals
An investigation by the EU’s antitrust division led officials to claim that the tax arrangement could represent unfair state aid, and needed to be brought to an end. National governments from around the union have protested that Amazon’s tax practices are making life incredibly difficult for local retailers and bringing less tax money into their coffers, even though they are legal under the EU’s Single Market legislation.
Other companies are also under investigation for similar tax arrangements. Apple Inc. and Ireland have an arrangement which is being investigated, as is an agreement between Starbucks and the Netherlands. There have been no announcements from either company regarding the booking of revenues through local subsidiaries in order to head off regulators.