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Australia Books Government The Almighty Buck

Amazon's Luxembourg Tax Deals 200

Presto Vivace writes in with this story of a European Commission investigation into a secret tax agreement between Amazon and Luxembourg. "Leaked tax documents from accounting firm PwC in Luxembourg show how Amazon sidesteps the 30 per cent tax rates local [Australian] players face. The Luxembourg documents, obtained in a review led by the International Consortium of Investigative Journalists, contain some of the first hard numbers and details on how Amazon pays virtually no tax for its non-US earnings, including in Australia. Last month, the European Commission announced an investigation into the secret 2003 advance tax agreement Amazon struck with Luxembourg that is the key to its global tax strategy. The Luxembourg documents show not only the extent of the related-party transactions in Amazon's Luxembourg companies but how Amazon has changed its tax strategy after investigation by French tax authorities and the US Internal Revenue Service. The change is so dramatic it raises questions whether the European Commission is targeting the right transactions."
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Amazon's Luxembourg Tax Deals

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  • Paraphrasing John Gilmore [wikiquote.org]:Corporations interpret taxation as damage and route around it.

    • Re: (Score:2, Insightful)

      by roman_mir ( 125474 )

      Taxation is damage and if you are not routing around it you get damaged. Income related taxes are anti-progress, anti-society, anti-economy. "Progressive" income taxes are anti-individual liberty, pro-discrimination. Income related taxes are immoral and bad economics (let government to grow when the other spending is actually cut by people, governments should be cut just like all other expenses when people cut down on spending, by tying government to income taxes, society destroys savings thus destroying

      • by dbIII ( 701233 )
        Yes I understand your philosophy - teamwork is evil and expecting people to contribute to a group effort is evil.
        Now that's out of the way can we take it as read that some don't agree with it and would ike to discuss details of this tax/tithe/volunteering stuff you see as evil?
        • Re: (Score:3, Insightful)

          by roman_mir ( 125474 )

          Wrong, involuntary coercion is not teamwork. Violence is evil and what you call a 'team', I call a pack of thieves if they are using the collective to steal from others to subsidize themselves or anybody ag all. So lets start over: violence is evil. Real voluntary exchange is teamwork that does not rely on violence.

          Using violence to force people to give up anything in life is evil, cooperating on voluntary basis is helpful.

          Taxes are state (mob) violence. Non agression is not even discussed as a subject

          • by dbIII ( 701233 )
            Fair enough, I see where you are coming from, but could you please let us violent mobsters discuss who it's best to take money from and how. It's difficult to scrape up much from poor people and a waste of stolen resources.
          • Using violence to force people to give up anything in life is evil

            What if you use violence to force them to give up attempts at committing violence against others or you?

      • That's a nice rant on income taxation but the article here is discussing corporate taxation (and evasion).
        • That's a nice rant on income taxation but the article here is discussing corporate taxation (and evasion).

          Corporate income taxation, so the rant is directly on topic, whether or not you agree with it.

          Personally, income taxes don't give me heartburn, but I think corporate taxes are a bad idea. They're just a way to hide taxes from the real taxpayers. Hidden taxes are truly evil. Government provides value for money, and the customers/owners of government (the taxpayers) need to see both the costs and the value clearly so they know if they're getting a good deal. Hiding costs subverts critical transparency.

          • I'm going to insist here that, while income taxes on corporations are debatable, lower-level taxes on corporations are necessary. Factories and the like use public infrastructure, and not making them pay for it distorts the market.

      • Well not all of your output, but some of it. Before the usage of currency was that common for the plebs that is in fact how governments taxed the people, X days a years/x years a lifetime of work were owed the state. And yes the government owns you, but which type of tax it extracts does not change that. At its heart it is a natural extension of the idea that society is just the peaceful collaboration of the people; The only thing you owe the government is some percentage of work in collaboration for the be
      • by AK Marc ( 707885 )

        Income related taxes are immoral and bad economics (let government to grow when the other spending is actually cut by people, governments should be cut just like all other expenses when people cut down on spending, by tying government to income taxes, society destroys savings thus destroying and preventing capital investments).

        If governments spent low enough, taxes aren't even necessary. With a strong currency, the government can print more, rather than manipulating interest rates, and pay for services out of that. We can't do that in the US because of the military, but other places with lower taxes and more services could.

    • by Anonymous Coward

      I'm sure you'd complain too if you had to pay $300,000,000 out of $1,000,000,000.

      Paying 30 cents for a dollar doesn't seem like a lot... but $300,000,000 is quite a bit.

      Tax rates are too high. This is why corporations evade them: so they can stay alive.

      • by Austerity Empowers ( 669817 ) on Friday November 07, 2014 @12:48AM (#48331853)

        Corporations avoid them because it is profitable to do so.

        • Wow, insightful. People avoid having their money taken from them because it is profitable not to have your money taken from you. Hmmm. Water is wet, fire burns, people want other people's money.

      • by williamhb ( 758070 ) on Friday November 07, 2014 @01:09AM (#48331913) Journal

        I'm sure you'd complain too if you had to pay $300,000,000 out of $1,000,000,000.

        Paying 30 cents for a dollar doesn't seem like a lot... but $300,000,000 is quite a bit.

        Tax rates are too high. This is why corporations evade them: so they can stay alive.

        No, I think I'd be too busy sipping pina coladas on a beach somewhere to complain about much of anything if had $700 million after tax!

        • No, I think I'd be too busy sipping pina coladas on a beach somewhere to complain about much of anything if had $700 million after tax!

          Indeed. I run my own small business. There's all sorts of tricks I could use to minimize personal tax down to almost nothing. I don't because I like the country I live in and I understand taxes are necessary to keep it running. So, I do my taxes normally.

          So sure, it sticks in my craw a bit at the time I have to part with money because hey, who wants to have less money, but

      • Paying 30 cents for a dollar doesn't seem like a lot... but $300,000,000 is quite a bit.

        Keeping 70 cents per dollar doesn't seem like a lot... but $700,000,000 is loads!

        30% isn't that bad all in all, what high taxes mean is that the companies put the prices up to compensate so the retained income after tax is enough to maintain the company. If the tax dropped to 20% then the company would just find it had more leeway to reduce prices and be more competitive.

        So high company taxes hurt the consumer, but then

  • If not then why would Amazon being paying any taxes? Of course I'm under the assumption Amazon still hasn't made any money, if that's changed then I must have missed it...
    • by putaro ( 235078 )

      How much does Amazon Australia spend on R&D? I'm betting they do make a profit and remit it back to the US parent which then spends on R&D. Quite fair for Australia to ask for a cut of the profit made in Australia.

      • by dbIII ( 701233 )
        Especially since the booksellers that do pay tax are undercut by Amazon and lose sales. A lot of bankruptcies have been blamed on that.
    • by guruevi ( 827432 ) on Thursday November 06, 2014 @10:23PM (#48331369)

      Amazon is making a shitload of profit, they're just shifting the profits around by having their holdings that doesn't pay these taxes charge them a 'fee' to reduce the amount of profit they 'have'.

  • by putaro ( 235078 ) on Thursday November 06, 2014 @10:21PM (#48331359) Journal

    Essentially what Luxembourg is doing here is offering tax collection as a service. Luxembourg collects a small percentage but much more than they would get otherwise, since Amazon et al. don't do much business in Luxembourg and offers these large corporations a legal shield against other countries' taxes.

    This would appear to be a bug in the international tax system.

    • by BitterOak ( 537666 ) on Thursday November 06, 2014 @10:31PM (#48331407)

      This would appear to be a bug in the international tax system.

      Quite the contrary. It's not a bug it's a feature. The kind of deal Amazon was able to strike with Luxembourg is an important defense against overly greedy countries (like the U.S.) which try to tax more than they should be entitled to. Note that the story says this is only about non-U.S. earning. Why should the U.S. be entitled to taxes on non-U.S. earnings?

      If Luxembourg is willing to offer lower tax rates than other countries, why shouldn't Amazon accept? It's no different than choosing to shop at a store that offers the lowest prices.

      • by Anonymous Coward

        Here's a great book explaining the issue, sold by amazon no less: Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens [amazon.com]

        Worth every penny, and a must-read regardless of your political leanings.

      • by Anonymous Coward

        Note that the story says this is only about non-U.S. earning. Why should the U.S. be entitled to taxes on non-U.S. earnings?

        You are a moron, aren't you? Non-US earnings are not taxed by US until money is transferred by said company back into the US. How fucking hard is it to comprehend that?

        The fuckup is other nations that are apparently part of a "union" to transfer money between said jurisdictions that do NOT have unified tax code, to transfer them without paying fair taxes to the destination. EU either has to fix their tax system so tax rates are uniform, OR it has to stop with the practice of tax-free money flows in the EU.

        • Of course, there are people, like the parent, that are too stupid to understand how taxation work in the first place. So things like tax heavens are completely over their heads.

          True, I was so stupid, I used to think they were called "tax havens", not "tax heavens". But I guess you enjoy paying taxes so much, you consider it a heavenly experience.

          • by putaro ( 235078 )

            Well, considering that you're NOT paying taxes in a tax haven, tax "heaven" seems reasonable.

      • Note that the story says this is only about non-U.S. earning.

        If you RTFA, there's only one of three possibilities:
        1. US assets were under priced in order to keep income out of the US.
        2. European assets were over priced in order to shift income to a lower tax EU jurisdiction.
        3. All of the Above

        The correct answer is 3 and this story is not about US earnings, because those articles have already been written.
        Special Report: Amazon's billion-dollar tax shield [reuters.com]
        Dec 6, 2012

        Amazon disclosed in October 2011 that the IRS wanted $1.5 billion in unpaid taxes. It has declined to say exactly what transactions the charge relates to but said it was linked to "transfer pricing with our foreign subsidiaries" over a seven-year period from 2005.

        Who knows why the EU didn't bother to aggressively investigate until now.
        The broad outlines were laid ou

        • by Splab ( 574204 )

          Well the positive thing about the EU finally getting involved is they have no trouble dealing out billion dollar fines.

          But this goes *way* beyond Amazon. The director of the department where the lady in charge of investigating this (Magrethe Vestager) is the former prime minister of Luxembourg and *might* be deeply involved with the tax evasion.

          Some very interesting times ahead, especially for Luxembourg...

      • Re: (Score:3, Insightful)

        by penguinoid ( 724646 )

        Why should the U.S. be entitled to taxes on non-U.S. earnings?

        Why shouldn't I be able to declare my residence a PO Box in Luxembourg, and work in the US but deduct the majority of my earnings as licensing fees to my other headquarters (and so earned there rather than here), thus only paying a fraction of the taxes I would otherwise? And then receive government services and aid due to my low income? That's the sort of thing corporations do.

        And actually I might be able to pull this off, if I create a company elsewhere, hire myself at my company at low wage, and offer th

        • by ranton ( 36917 )

          Though I have a sneaking suspicion that this isn't allowed for the little guy.

          You are more than capable of incorporating yourself if you think it will help with taxes. I did it when I was doing independent consulting. I even had a lease agreement with myself so I could deduct extra expenses even though I was taking the standard deduction on my personal tax returns. It i perfectly legal.

          But when it comes to employee compensation, there are going to be rules governing what you can or cannot expense as a business. Just like there are or the big guys.

      • Quite the contrary. It's not a bug it's a feature. The kind of deal Amazon was able to strike with Luxembourg is an important defense against overly greedy countries (like the U.S.) which try to tax more than they should be entitled to. Note that the story says this is only about non-U.S. earning. Why should the U.S. be entitled to taxes on non-U.S. earnings?

        "Amazon EU ended up paying 0.5 per cent tax." So by your reckoning a tax rate of any higher than 0.5% is unwarranted government greed? I think you misunderstood what people mean when they talk about "the 1%" - it ain't supposed to be their tax rate!

      • by putaro ( 235078 ) on Friday November 07, 2014 @02:10AM (#48332057) Journal

        If it was only shielding non-US profits from US tax collection I'd be inclined to agree, but I think they're evading taxes in every country they're doing business in.

        Luxembourg can afford to offer low tax rates because there's no cost to them. Amazon is using the infrastructure in other countries (e.g. roads, airports, etc.) to make money without paying for it. If they actually based their entire business in Luxembourg and then shipped worldwide I'd say it made sense. This is not competition on tax rates, this is just a scam.

      • Quite the contrary. It's not a bug it's a feature. The kind of deal Amazon was able to strike with Luxembourg is an important defense against overly greedy countries (like the U.S.) which try to tax more than they should be entitled to.

        Well, then I'm supposed to say "thank you" fot this "defense" that allows to pay these companies much less than they "should" have to pay?

        Sorry, but that is pure rubbish as there is no objective view on how many taxes a company SHOULD have to pay. (This holds for my above example, too, of course)

        Entities have to pay as many taxes as the laws require them to pay. But defining how many taxes someone SHOULD have to pay, depends on who you're asking. Me for example, shouldn't have to pay any taxes, because I'm

        • by stdarg ( 456557 )

          You don't have to say "thank you" for it, but you have to weigh your options. Two options are making a new tax treaty with the country involved to get rid of the shielding, and sanctioning the country to prevent Americans and American companies from dealing with them.

          But you have to ask yourself, is it worth it? What burden does Amazon really put on the US? When they make more sales in Australia, does that somehow increase their burden in the US? If not, then why require them to pay more than they already d

          • Thank you for that US centric point of view.

            Who cares if Amazon damages the US, France or Italy? (again: what damage do they actually take compared to WHAT? Counting taxes a company should have payed as damage makes as much sense as filing an insurance claim for the Picasso that COULD have bin in the trunk of your totaled car)

            The biggest damage also isn't for the US at all, because as you mentioned, they create at least some high paying jobs there. But from all other states, Amazon (in this example - replac

            • by stdarg ( 456557 )

              I think what I said could apply to any country, not just the US. But regardless, I agree with your main point that small businesses are hurt by this. I think corporate taxes should be abolished completely. Charge taxes to the people who make up the corporation. That can be income tax, sales tax, capital gains tax, etc. Each country does it however they want. If you live in America, you pay taxes in America regardless of where you earned the money. If you buy something in China, you pay Chinese sales tax reg

      • by dargaud ( 518470 )
        Why the fuck don't companies pay taxes in the countries they do business with ? Yes, each of them; according to how much money they make in said country.
      • This would appear to be a bug in the international tax system.

        Quite the contrary. It's not a bug it's a feature. The kind of deal Amazon was able to strike with Luxembourg is an important defense against overly greedy countries (like the U.S.) which try to tax more than they should be entitled to. Note that the story says this is only about non-U.S. earning. Why should the U.S. be entitled to taxes on non-U.S. earnings?

        If Luxembourg is willing to offer lower tax rates than other countries, why shouldn't Amazon accept? It's no different than choosing to shop at a store that offers the lowest prices.

        Turn it around. Why should Amazon be allowed to transfer profits made in any one country out of that country to avoid paying taxes there?

        You, as a taxpayer, should really be asking this question because it's you, as a taxpayer, that is going to have to pick up the difference in who funds the national bill.

        As far as which country, it doesn't matter. If Amazon does business in country ABC, it should pay taxes in that country per the laws of the country as part of its business model.

        When mega-companies like

    • So the question then becomes, is anyone running a service which makes this available to individuals for a fee? If it's legal for Amazon, it must be legal in general, right? You contract them to handle your finances or something.

      • by putaro ( 235078 )

        Well, as a normal US citizen (I'm an ex-pat so I have to deal with this crap) the US wants to tax you on your worldwide income. The only legal way to avoid that is to give up your US citizenship. Currently, I think the US is the only country that tries to tax you on your worldwide income so pretty much if you shift your citizenship to any other country you can then go reside in whatever low tax locale you can and only pay the local taxes. The US has come up with an "exit tax" though, so if you have a sub

        • Well, I haven't found a country I'd want to call my own selling citizenships for less than 100k yet. Any useful info there?

    • At least Amazon has a substantial office in Luxembourg, handling AWS. I'm sure they don't do a lot of sales there, but they at least have a presence there. According to http://ict.investinluxembourg.lu/ict/amazoncom [investinluxembourg.lu] there are about 500 Amazon employees in Luxembourg. I interviewed for a job there a few years ago but screwed up one of the interviews pretty badly and didn't get the job.

      It's possible or even likely that Amazon had to open an office of a certain size in Luxembourg as part of the deal they
  • How is this different than the other zillion companies that funnel money through Luxembourg for tax purposes. Or in the US, in Delaware?

    Oh, I get it....because it is a geek company, Amazon.
    • by jabuzz ( 182671 )

      The reason the EU are targeting Amazon at this time is that they are making the case that the "special tax rates" that the Luxembourg state gave to Amazon constituted illegal state aid. That is the EU has tough rules on governments handing out money to companies to stop a race to the bottom. So it is not that Luxembourg has low tax rates but that they cut Amazon a special rate.

      Likely outcome is that Amazon will have large back taxes to pay to the Luxembourg government, and the EU will then impose a fine on

  • It's so stupid for countries to each have their own special tax exemptions thinking they can lure in some extra companies. The end result is that big companies have meaningless (=no extra jobs but empty buildings) box offices everywhere and effectively pay no taxes. Anywhere! So in the end the countries not only receive no benefits, but also less taxes from their own companies. And it heavily favors big companies over smaller ones. But I guess politics are too corrupt and big companies are paying too much '
  • Is *anything* they're doing actually illegal? I somehow suspect not - as much as companies don't want to pay taxes, they want to leave themselves open to prosecution even less.

    The article implies strong condemnation for their practices, but the fact is that taxes aren't charity - a company, like an individual, is ENTITLED to avoid tax however they legally can.

    If the tax schemes are so complicated that they prevent their own regulators from understanding what's happening, that's hardly the company/individua

    • by makapuf ( 412290 )

      OK - well I'm not but let's assume - Why not :
      - single out that this is not normal or moral (even if legal) and shop accordingly
      - let the bad publicity be asserted again and again until it changes (by example, just tell every time you talk about Amazon about their tax rate)
      - talk about the sociopaths ruling the place as such and isolate them socially until they change (you know, like in certain societies / countries it is not accepted to do some things but perfectly acceptable to do in others ? it works.)

      un

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