Amazon finally reached a tax evasion settlement with French authorities to cover back taxes, and penalties for failing to report earnings over a stretch of five years. While the amount of the settlement has remained undisclosed, the initial tax bill from French authorities was upwards of 200 million euros.

EU pressure on the tech giant is mounting, and Amazon refuses to comment or provide any specific details of the settlement. The settlement mostly occurred behind closed doors, but it sends a strong message that there will be less leniency in dealing with issues such as these.

Between 2006 and 2010, Amazon Avoided Tax Penalties

Much like Google does with Ireland, Amazon uses Luxembourg as its European subsidiary for revenues, avoiding a hefty corporate tax. “Project Goldcrest” was the name of the venture that allowed for the vast bulk of European income taxed at an extremely low rate.

Ireland and Luxembourg are well-known for being low-tax subsidiaries, so it’s common practice for tech companies such as Amazon and Google to use them. Failure to report the bulk of its sales through other European countries helps them avoid more substantial penalties and fines.

Tech Giants Benefit From Current Tax Laws

A recent case brought by French authorities against Google found they were not liable for the 1.1 billion euros in back taxes they owed. It was ruled that Google simply does not have a substantial enough of a taxable presence in France.

The existence of an Amazon branch in France since 2015, as well as their boasted retail sales and profits makes their presence more viable. Amazon still insists they want to provide their customers with the best possible buying experience.

Amazon argues in its defense that they care very much for their customers in France, citing the two billion euro invested in the country since 2010. Amazon also boasts creating more than 5,500 jobs for French workers.

French Finance Ministers Want New Tax Laws

French authorities insist that Amazon be held responsible and should be taxed in France. Bruno Le Maire, French Finance Minister, is pushing for a complete tax code overhaul and legislation that would hold tech companies like Amazon more accountable.

Tech companies might soon be responsible for an “equalisation tax”. This has garnered much support from European countries such as Italy, Germany, and Spain. These countries feel taken advantage of and forced to provide advantage of tax benefits, and are susceptible to failure in reporting earnings properly. Investigations into providing more details about this new regulation are said to arise as early as March 2018.

However, Luxembourg is challenging the accusation of providing illegal tax benefits. They are hoping they can overturn the decision by submitting an appeal. Amazon further insists that they are the victim of an overestimation of their assets. But this recent settlement comes just on the heels of a deal with Italian authorities, disputing their tax payments during the period of 2011 through 2015. Amazon insists the tax laws permit the use of subsidiaries and that what they are doing is “totally legal”.

To learn more about how to blow the whistle on tax evasion cases, contact Jeff Newman Law today.