Despite 51.3 billion euros in revenue, Amazon did not pay taxes in Europe in 2021

Despite 51.3 billion euros in revenue, Amazon did not pay taxes in Europe in 2021

Amazon centralizes its European activities in a parent company based in Luxembourg. By claiming losses of one billion euros, the e-commerce giant manages to avoid being subject to the contribution… and even obtains a tax credit.

This is information that should please European Commissioners Margrethe Vestager and Thierry Breton. And for good reason, Amazon paid no tax on its income in 2021, according to Bloombergwhich reveals the outlines of the American giant’s tax optimization strategy on the Old Continent.

Last year, the firm now headed by Andy Jassy recorded a turnover of 51.3 billion euros in Europe, up 17% compared to the 43.8 billion euros earned in 2020. But at the same time, it declared a loss of 1.16 billion euros, which allowed the American group to escape corporate tax, and even to receive a tax credit of one billion euros, according to the documents consulted by Bloomberg.

Expenses heavier than income

This exceptional tax optimization for a company that earned nearly $470 billion in revenue (+22%) and more than $33 billion in profits (+57%) worldwide in 2021 is the result of a fairly simple ploy. Indeed, Amazon centralizes its European activities in a parent company based in Luxembourg, a country known to offer one of the most advantageous tax systems on the Old Continent.

This Luxembourg unit thus captures the revenues generated by the American giant’s e-commerce activities in the United Kingdom, Germany, France, Italy, Spain, Poland, Sweden and the Netherlands. And yet, Amazon declared an annual loss of 1.16 billion euros there attributable to 37 billion euros of “raw materials and consumables” and 15 billion “external charges”. With these deliberately increased costs, the American group therefore finds itself in a deficit situation.

“We are investing heavily in creating jobs and infrastructure across Europe, more than €100 billion since 2010. Corporation tax is based on profits, not income, and last year, Amazon EU Sarl recorded a loss as we opened over 50 new locations across Europe and created over 65,000 well-paying jobs, bringing our total European permanent headcount to over 200,000.”said an Amazon representative to justify the group’s European losses in 2021.

Amazon and Luxembourg’s magic royalty

In fact, Amazon especially enjoys a particularly attractive tax regime in Luxembourg, where its local unit has long paid intellectual property rights to another Luxembourg company that found itself out of tax reach. In other words, it was an excessive royalty that allowed him to evaporate most of his European profits. The second company, which collected this royalty, was then responsible for sending the European profits to Delaware, an American tax haven.

Enough to enrage Brussels, which had established in 2017 that Luxembourg had granted Amazon undue tax advantages for an amount of around 250 million euros between 2006 and 2014. “Thanks to the illegal tax advantages granted by Luxembourg to Amazon, almost three quarters of Amazon’s profits were not taxed. In other words, Amazon was able to pay four times less tax than other local companies subject to the same national tax rules. This is an illegal practice under EU state aid rules.”, said Margrethe Vestager, European Commissioner in charge of Competition. Consequently, the European Commission claimed 250 million euros in arrears from Amazon… a decision that the Court of Justice of the European Union annulled in 2021.