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Amazon Alters Its Tax Structure in Europe

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Investigations by the EU regulator force Amazon to change its tax practices

According to a recent report from the Wall Street Journal, Amazon (AMZN) will begin filing some individual tax returns in certain countries in Europe (EFA). The online retailer has put a new structure in place that will account for revenue earned by its local branches in the UK, Germany, Italy, and Spain.

There have been allegations that Amazon has benefited from tax arrangements in Luxembourg, which has a lower corporate tax rate. The EU regulator has been investigating a 2003 deal in which Amazon was allowed to make tax-free payments to a parent company based in Luxembourg for using its intellectual property.

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According to a report from the Guardian, Amazon’s UK branch has started recording sales so its profits can be taxed by Her Majesty’s Revenue and Customs. This move will put Amazon in the good books of British Chancellor George Osborne, who introduced strict measures targeting diverted profits with a tax popularly known as the “Google tax.” The main objective of this tax is to monitor technology firms that avoid paying taxes in the UK.

United Kingdom: An attractive tax destination

Most US multinationals have businesses in the UK. Some American companies have shifted their tax bases there. The attractive tax destination has helped these companies reduce their tax bills by considerable amounts.

Amazon’s move will force other technology giants, such as Google (GOOGL), Facebook (FB), and Apple (AAPL), to take suitable measures to deal with the ongoing investigations. Like Amazon, Google, too, has been facing allegations of routing all its profits through Ireland instead of the UK. The EU regulator has been investigating the tax deals granted to Apple by Ireland.

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