Online retailer Amazon paid no corporation tax on its operations in Europe in 2020 despite enjoying record sales income of €43.8 billion, according to corporate filings seen by The Irish Times.
The figures are fuelling scrutiny of the internet retailer’s tax arrangements as momentum grows for a global deal on corporate taxation after a year in which a shift towards online shopping due to the pandemic helped double Amazon’s profits in the United States.
Corporate filings in Luxembourg – home to the internet giant’s EU headquarters that handles sales for the United Kingdom, France, Germany, Italy, the Netherlands, Poland, Spain and Sweden – showed that Amazon EU Sarl had record sales of €43.8 billion last year, up from €32 billion in 2019.
But the company paid no tax to the grand duchy as, despite the record revenue, it reported a loss of €1.2 billion.
The retailer was granted €56 million in tax credits due to that loss, adding to an accumulation of €2.7 billion in losses carried forward, which can be used to offset future tax bills if the company does report profits in the future.
The corporate filings required by Luxembourg are less detailed than in many countries and Amazon’s run to just 23 pages, meaning it is hard to establish how the loss occurred despite the vast revenues. Revenue is not broken down by country.
The accounts show expenses of €31.8 billion on “raw material and consumables”, €12.4 billion on “other external expenses”, and €230 million on “other operating expenses”. Staff costs were €538 million.
A more favourable jurisdiction
“Other external expenses” include “provision of services from affiliated undertakings” while “other operating expenses” are “primarily related to licence agreements and royalties with affiliated undertakings”, according to the accounts.
Multinational companies can effectively move profits to be taxable in a more favourable jurisdiction through one part of the corporate structure charging another for things such as the use of intellectual property or interest on debt.
A spokesman for Amazon said that profits were low due to tight margins in retail, and investments made by the company, which amount to €78 billion in Europe since 2010, particularly in infrastructure.
“Amazon pays all the taxes required in every country where we operate,” the spokesman said. “Corporate tax is based on profits, not revenues, and our profits have remained low given our heavy investments and the fact that retail is a highly competitive, low margin business.
“We’ve invested well over €78 billion in Europe since 2010, and much of that investment is in infrastructure that creates many thousands of new jobs, generates significant local tax revenue, and supports small European firms.”
The company had an average of 5,262 employees during the financial year, according to the filings, meaning it had sales of just over €8.3 million per employee. The filings were audited and signed off by Ernst & Young.
The results come amid mounting momentum for an international deal on the taxation of digital giants brokered through the Organisation for Economic Co-operation and Development (OECD), after the administration of United States President Joe Biden issued proposals for digital taxation and a global minimum rate.
Illegal state aid
In 2017, the European Commission found that Luxembourg had offered Amazon €250 million in tax advantages and was ordered to recuperate the sum as illegal state aid. Luxembourg appealed the decision and proceedings are ongoing, with the sum held in an escrow account.
“We believe the European Commission’s decision to be without merit and will continue to defend ourselves vigorously in this matter,” a note in the Amazon EU Sarl financial accounts read.
The European Commission is preparing to release new tax proposals this month and said it would work to combat fraud and problems with taxation.
“The Commission will continue to monitor Amazon’s behaviour with respect to corporate taxation,” said European Commission spokeswoman Arianna Podesta.
The Fair Tax Foundation, which provided an analysis of the corporate filings, said it had calculated that Amazon has paid a corporation tax rate of 9.8 per cent on their global profits over the last 10 years and that the filings showed the situation was "deteriorating".
“These figures are mind-blowing, even for Amazon,” Fair Tax Foundation chief executive Paul Monaghan. “We are seeing exponentially accelerated market domination across the globe on the back of income that continues to be largely untaxed – allowing it to unfairly undercut local businesses that take a more responsible approach.”