By Ruadhan Mac Cormaic (Irish Times)
Executive summary (SAIT Technical)
France has made a claim for $252m in back taxes, interest and penalties in relation the the allocation of income between foreign jurisdictions between 2006 and 2010. Amazon intends to fight the claim. The company minimizes its European tax bill by channeling sales through Luxembourg.
FRANCE HAS made a $252 million tax claim against internet retailer Amazon, signalling a widening crackdown by Paris on multinational companies that channel profits through low-tax countries.
Amazon said the French authorities had made the claim for back taxes, interest and penalties in relation to "the allocation of income between foreign jurisdictions” between 2006 and 2010. It intends to fight the claim.
The move against Amazon comes amid growing scrutiny in France and Britain of multinationals that funnel revenue from their operations in both countries through low-tax regimes. France’s tax office is investigating the relationship between Google’s French subsidiary and its European headquarters in Dublin, while executives from Google, Amazon and the coffee chain Starbucks came under intense pressure from MPs in London on Monday.
Amazon minimises its tax bill in France and other European countries by channelling sales through Luxembourg, which offers tax breaks to foreign companies that base themselves there. "We disagree with the proposed assessment and intend to vigorously contest it,” the company said of the $252 million claim in financial results filed in the United States.
Court documents show officials in Paris suspect Google’s French arm of selling advertising to major French clients while declaring revenue from such activities in Ireland, where the corporate tax rate is lower. French police carried out raids on Paris addresses linked to the company last year, and speculation is rife that Google also faces a heavy tax claim.
The investigative newspaper Le Canard Enchaîné reported last month that the authorities were seeking €1 billion from Google, but the company denied this and insisted it complied fully with tax laws in Ireland and France.
Google generated €1.25-€1.4 billion in revenue in France last year, according to estimates, but paid just over €5 million in corporate tax to the French exchequer. A number of other firms have recently been drawn into the controversy.
According to a study by Agence France-Presse, Microsoft paid €21.6 million in tax on revenue of €493 million last year. Apple, which recorded revenue of €52 million in France, paid €6.7 million in tax.
"These numbers are very surprising when one knows the real revenue figures,” said Eric Vernier, a financial specialist at the Institute for International and Strategic Relations in Paris. He estimated that the tax arrangements of a small number of multinationals meant the French exchequer was losing between €500 million and €1 billion each year.
France is expected to overhaul its corporate tax system in the coming months, with President François Hollande promising to adjust the system to help smaller companies and make it more difficult for large firms to avoid high rates.
Under one proposal being studied, three rates, of 35 per cent, 30 per cent and 15 per cent, would be introduced, with the heaviest burden falling on the largest companies. The highest nominal rate is currently 33.3 per cent, but some of the largest CAC40 companies pay a fraction of that.
France has long protested against Ireland’s 12.5 per cent rate, and it hopes EU discussions on a common consolidated corporate tax base will lead to a more harmonised system. Dublin has big reservations about the initiative and has said it will resist any pressure to raise its headline rate.