Amazon also catches flak in Germany
July 19, 2013 | 10:14 am
UK and France are not the only European countries to indulge in a spot of gratuitous Amazon-bashing. Now Germany is seeing the same trend, with Reuters reporting “outraged” complaints by Sven Giegold, German Green Party Euro MP, at Amazon’s low German tax bill despite its huge sales there.
Figures in the Reuters report show Amazon declaring €10 million of profits and paying only €3 million in income tax in 2012, despite actual German sales of $8.7 billion. This was done by channeling the sales through Luxembourg-registered Amazon Europe Holding Technologies, which as a tax-exempt partnership, does not have to pay income tax on them.
To be clear: This is not about sales of virtual goods. With only around four percent of German adults owning an e-reader, the revenues that make Germany Amazon’s largest non-U.S. market are almost all coming from online print book and consumer goods sales.
But German buyers who use Amazon.de are actually paying Luxembourg-headquartered Amazon EU SARL, which receives all Amazon’s European revenues, and pays a small amount back to Amazon.de, but a much larger amount to Amazon Europe Holding Technologies to license its technology. The often uncommonsensical and arbitrary distinctions and jurisdictions of e-book buying don’t apply here.
And any pretense that Amazon is somehow a purely virtual operation in Germany with no presence on the ground has been conspicuously undermined by its very public labor dispute with its German workforce, which interestingly seems to hinge around the classification of those workers, and of the business they work in, and the commensurate entitlements and benefits. Amazon wants to class its workers as logistics personnel. The workers’ union wants them to be classified as retail and catalog sales employees.
Exactly how Amazon will get out of this one remains to be seen. It is not breaking the law in any of the jurisdictions where it operates, and a wave of reactive legislation risks simply opening new loopholes for it to wriggle through. Harmonization of European tax practices is probably going to have to wait on rather more weighty priorities than just populist MNC-bashing.
That said, Amazon is now facing a public relations challenge in some of its most important European markets, and the moment that it translates into a sales dip that comes close to the money saved through these tax practices, even the 800lb retail gorilla will start to shuffle. Perhaps voluntary compliance, a.k.a. name-and-shame, really is the best way after all.