Where Will Giants Like Amazon.com, Inc. (NASDAQ:AMZN) Go?

Posted by Lynn Eisler November 5, 2013 0 Comment 2370 views

The tech giants including Amazon.com, Inc. (NASDAQ:AMZN), Google Inc. (NASDAQ:GOOG) and Yahoo! Inc. (NASDAQ:YHOO) operates in a way to save millions of dollars per annum by setting up their online advertising sales operations in countries like Ireland or Luxembourg which are generally regarded as low-tax countries or the ‘tax heavens’. Multinational tech companies reduce their tax burdens by effectively parking their intellectual property services in low-tax countries and charging the affiliates or group companies enormous fees for using those services. However, the politicians in rich countries including those of the European Union states are increasingly becoming aware of such practices and beginning to target such parties and practices.

To explain further, Google employs third-party companies from foreign countries to serve the Italian market with Google network advertisements. Hence the Italian politicians are planning to debate a proposal that could potentially force such multinationals to employ such advertising agencies that pay Italian taxes. Earlier the Italian parliament tried to levy direct tax on major tech companies, but it did not succeed. Hence this time, the new levy dubbed as ‘Google Tax’ would rather levy taxes on the extra income of Italian tax paying advertising agencies/internet service providers that Google and other tech companies would be obliged to work with. The bill, under debate at the parliament, eyes to raise around EUR 1 billion and is already tabled by the center left Democratic Party which plans to make a bill an amendment to the Italian government’s 2014 budget.

Earlier it was also reported that Amazon.com, Inc. (NASDAQ:AMZN) minimizes its corporate taxes by channeling sales through its units in Luxembourg. Some European newspapers also reported that the Luxembourg arrangements deprived European governments of hundreds of millions in taxes. Moreover such arrangements also allow the company to reduce their tax burden even in the U.S. The inter-company payments have been estimated to help Amazon save at least $2 billion in taxes. While the U.S. IRS (Internal Revenue Service) claims $1.5 billion in back taxes from Amazon, Tax authorities in the U.S., Luxembourg, UK, France and Germany declined to comment, maintaining the taxpayer confidentiality. Over the past six years, the group has been part of tax departments’ scrutiny in at least six countries.

About Lynn Eisler

Lynn Eisler is a national news reporter focusing on economic issues, data analysis and the financial health of state and local governments. Lynn has been honored with the H.L. Mencken Award for Investigative Reporting, the Champion of Justice Award for reporting on the drug war, and the John Hancock Award for business reporting. Lynn was also a Knight Medical School Fellow at the University of Michigan.

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