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Amazon will start to pay more tax in Europe

Amazon UK packaging Inc. has started booking revenue from retail sales in individual European countries, instead of funneling all sales through low-tax Luxembourg, amid intense scrutiny of corporate tax practices in Europe.

The change was made effective May 1, a company spokesman said. Amazon has so far rolled out the structure, with local branches booking revenue, in the U.K., Germany, Italy and Spain, according to a person familiar with the matter.

Amazon's move marks a sea change in its approach to tax in Europe. Depending on how the company allocates costs, it could significantly boost the firm's tax bill in many EU countries. It could also put pressure on other companies to do the same.

A number of tax savings structures by multinationals operating within Europe are now under greater scrutiny. The EU has opened several probes of tax deals between companies, including Amazon, and individual EU countries.

EU regulators investigating Amazon said in January they believed the tax structure in Luxembourg could provide an illegal and unfair advantage over competitors.

The probe is one of several into the tax structures of companies such as Apple Inc. and Starbucks Corp. Representatives for the companies involved have said they didn't receive special treatment.

Amazon is also under pressure from other probes in Brussels, including an antitrust inquiry into e-commerce and an investigation into online platforms.

Individual countries have also started agitating for more tax to be paid within their borders.

In France, tax authorities are investigating several U.S. firms--including Google Inc.-- alleging they owe back taxes. In Google's case, the allegation is that the company should have been booking revenue in France that it instead had sent to Ireland.

Google has said it complies with tax laws everywhere it operates.

The U.K., generally considered more business friendly, also recently passed a budget that increased taxes for companies deemed to be aggressively trying to avoid taxes. Amazon said it paid GBP4 million ($6.2 million) of taxes in the U.K. on GBP449 million of revenue in 2013, according the most recently available public filings.

Amazon said it had started to lay the groundwork for diversifying its retail sales structure two years ago.

"We regularly review our business structure to ensure that we are able to best serve our customers and provide additional product and services, " a company spokesman said.

Source : Lisa Fleisher and Sam Schechner - Wall Street Journal

26 May 2015

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