US online retail giant Amazon (NASDAQ:AMZN) were trading slightly lower this afternoon after announcing the end of an optimized fiscal practice for four major European markets in favor of an individual country basis, leaving i with a largert tax bill.
As of May 1, Amazon said it has declared its revenues in UK, Germany, Spain and Italy instead of Luxembourg as it did before this date.
Part of the shift is due to Amazon’s plans to start operating in France while it was revealed that Amazon paid 11.9 million euros, or US$16 million, in tax on sales of US$11.9 billion in Germany, it biggest market outside of North America.
"We regularly review our facilities to ensure that we can serve our customers as well as possible and offer additional products and services," said the group in a statement, adding that the establishment of these local subsidiaries in Europe started more than two years ago.
By declaring income country by country, Amazon will have to pay taxes in these countries, something that was it did not do earlier.
So far, Amazon filed its European profits to its headquarters in Luxembourg, which offers preferential fiscal policies that allowed it to significantly reduce its tax bill.
Such practices are legal, but increasingly challenged at European level, particularly since many of the EU member States have been confronting a challenging fiscal situation, because of a protracted recession.
Amazon is indeed one of the biggest companies that has taken advantage of special tax schemes within the EU. Apple has done it in Ireland, Starbuck in the Netherlands Starbucks and Fiat, (FCO) in Luxembourg where it shifted global headquarters from Turin.
The European Commission launched an investigation into Amazon’s practices prior to the Luxleaks scandal’s breakout and the revelation that dozens of companies, including Pepsi, IKEA, AIG, Deutsche Bank, Abbott Laboratories and some 340 others signed secret deals with Luxembourg, allowing them to slash their taxes.
In March, the British government also confirmed the establishment of a "Google tax", named after the American group regularly criticized for its tax optimization practices, imposing the profits of all multinationals to a 25% tax on profits generated out of the country.
Amazon’s mea culpa, which suggests the company cares about its image as a socially responsible company, was a preemptive move as pressure against tax avoidance mechanisms has been increasing globally.
The G20 and the Organization for Economic Cooperation and Development (OECD) have launched an international offensive. Moreover, where its EU expansion plans are concerned, last March a French academic report called for the introduction of new taxes targeting internet based retailers, such as Amazon.