Fiscal sidestep to Luxembourg benefits Amazon greatly

Goal: avoid taxes

Amazon has managed to avoid higher tax rates in other countries as it routes its orders through Luxembourg. It has even managed to get a 5 million euro refund from the Luxembourg authorities, according to The Sunday Times.

The avoidance technique is simple: a Briton who purchases something at Amazon does so through a website owned by a Luxembourgian Amazon subsidiary, which in turn pays the British subsidiary a small fee for further services, even though 5,000 people are employed at the British company. The selling party, the aforementioned Luxembourgian company, pays another Luxembourgian Amazon company for the use of intellectual properties, like its brand name, to keep its revenue relatively low. That last company then has revenue coming from intellectual properties, 80 % of which is exempt from taxes.

Amazon is not the only one

Local tax authorities have found these tax avoidance techniques quite bothersome for quite a while now as they want companies to contribute to the society from which they gather their income.

Especially in Great Britain, the frustration is rather poignant: Amazon had a 2013 turnover of 4.3 billion pounds (5.3 billion euro), but only paid 4.2 million pounds (5.1 million euro) in taxes.

Amazon also has European offices in Austria, France, Germany and Italy, but it is unclear how much it has paid in these countries. However, Amazon is not the only one as others – like Google, Apple, IBM and Starbucks – have also received flak because of the same technique.