Amazon's Luxembourg Tax Deals

Presto Vivace writes in with this story of a European Commission investigation into a secret tax agreement between Amazon and Luxembourg. "Leaked tax documents from accounting firm PwC in Luxembourg show how Amazon sidesteps the 30 per cent tax rates local [Australian] players face. The Luxembourg documents, obtained in a review led by the International Consortium of Investigative Journalists, contain some of the first hard numbers and details on how Amazon pays virtually no tax for its non-US earnings, including in Australia. Last month, the European Commission announced an investigation into the secret 2003 advance tax agreement Amazon struck with Luxembourg that is the key to its global tax strategy. The Luxembourg documents show not only the extent of the related-party transactions in Amazon's Luxembourg companies but how Amazon has changed its tax strategy after investigation by French tax authorities and the US Internal Revenue Service. The change is so dramatic it raises questions whether the European Commission is targeting the right transactions."

Comments

Re:Does Australia tax losses?

[guruevi]

Amazon is making a shitload of profit, they're just shifting the profits around by having their holdings that doesn't pay these taxes charge them a 'fee' to reduce the amount of profit they 'have'.

Re:we wish

[TubeSteak]

It worked like this: Amazon Europe paid 105 million EU to Amazon Technologies Inc in Nevada to license the rights to Amazon's intellectual property -- the patents and software for the websites, including that button that buys a book with one click.

Amazon Europe onsold the rights to use this intellectual property to Amazon EU for 519 million EU -- five times what it had paid the US company. Amazon Europe made an instant profit of 414 million EU, which would have been taxable, except that Amazon Europe is a limited partnership. It doesn't pay tax in Luxembourg.

Normally this would be called "transfer pricing" and considered "tax avoidance."

Transfer pricing involves a company selling [stuff] to its subsidiaries at market cost.
Tax avoidance involves completely legal maneuvers to minimize your tax exposure.

There are international norms for transfer pricing.
No way in hell is re-licensing some IP for a 400% profit going to pass muster.
Most likely, they'll have to restate some earnings and negotiate the size of their fine.

Over the last few years, there have been various hearings in the USA and internationally over transfer pricing.
It's on the radar of western governments and they're not very happy with the practice.

The most recent case I can think of was against Caterpillar.
They settled for peanuts on $2.4 billion in transferred profits.