How did Amazon manage to not pay taxes in Europe for years?

Founded almost 20 years ago, Amazon quickly became one of the most powerful companies in the world, with a market capitalization of more than 1,566 billion euros. The multinational established itself in Europe in 2006 under the name Amazon Eu Sarl and has continued to grow ever since. The European branch achieved a record turnover of 51.3 billion euros. Yet the American giant did not have to pay a €1 tax.

How ?

This tax avoidance is possible thanks to a relatively simple strategy. Amazon’s domestic operations in Europe are centralized by its parent company, located in Luxembourg† The national branches of the American giant must pay a fee to the Luxembourg company in order to use the brand.

The extremely high costs of this compensation put the national sectors in a deficit situation. As the Amazon spokesperson explains: “Corporate tax is based on profit, not income”which therefore exempts it fromtaxes†

However, the parent company in Luxembourg in turn pays non-taxable intellectual property rights to a second Luxembourg company. This is then responsible for redistributing the profits of Amazon’s European branch, in particular to the Delawarean American tax haven.

In addition to the savings achieved, this tax strategy has enabled the American multinational to 1,000 million euros in tax credits in 2021.

A shortage for Europe

If Amazon can save significant sums thanks to the tax optimization, this means a significant shortfall for European countries. The Organization for Economic Co-operation and Development (OCBE) assesses this lack between 100 and 240 billion of dollars.

Regular disputes

Amazon’s tax avoidance is massively criticized, both by the people and executives, despite its legality. In 2017, Brussels took Amazon to court in particular, as the tax benefits granted by Luxembourg were a illegal state aid† However, the digital giant won the appeal and escaped 250,000 million delinquent tax. The interglobalist organization Attackalso denounces this tax optimization by putting up signs in Paris.

The international tax

In order to find a permanent solution to this problem, an agreement has been reached between 136 OCBE countries to international tax multinationals† From 2023the latter will have to pay a tax rate of 15% minimum.