Luxembourg

Amazon’s Australia roll-out continues amid questions over tax haven


By added on 24/11/2017

(The Daily Telegraph) -- Amazon — the world’s biggest retailer — launched in Australia yesterday without explaining how much of its tax bill will be minimised through its tax haven in ­Luxembourg.

The American internet giant’s new Australian-based network has also sparked strong warnings to local retailers that it could rip off their products and destroy their markets.

Revenue from Amazon’s Australian operations is expected to be funnelled through its headquarters in the tiny European tax haven of Luxembourg, where it has set up shop to dodge taxes from sales made all over the world.

“They will be trying to exploit every single loophole in the Australian tax system,” Dr Shumi Akhtar from the University of Sydney Business School said.

Last month the European Union ordered Amazon to repay almost $A400 million to Luxembourg for “illegal tax advantages” that had allowed almost three-quarters of its profits to go untaxed.

At issue is the way Amazon in Luxembourg charges its subsidiaries in higher-taxing countries for the intellectual property behind its online sales system — reducing the taxable profits made in countries such as Australia.

Dr Akhtar said Amazon could use transfer pricing and claim the income was generated in Luxembourg because the Australian customers will be using the web based in Luxembourg.

“The reason is that Luxembourg has a corporate tax rate of 7 per cent, but you can negotiate lower, while Australia’s corporate tax rate is 30 per cent,” he said.

In America the Inland Revenue Service launched a court case against Amazon, demanding it pay more than $1.5 billion in unpaid taxes dodged by running accounts through a complex web of Luxembourg companies.

The court case revealed much of Amazon’s shadowy tax affairs but was ultimately lost by the IRS earlier this year.

They will try to exploit every single loophole in the tax system

Professor Robert Deutsch, senior tax counsel at The Tax Institute, said the government’s new Google tax laws were aimed to stop companies using tax havens to avoid taxes.

“But they are very new and we are going to have to have some court cases to see how that works,” he said.

Prof Deutsch said that there were “moral and ethical” reasons why companies earning money from Australians should pay taxes to fund Australian “hospitals, roads and schools.”

Amazon’s soft launch was met with hostility by Australian retailers.

Woolworths chairman Gordon Cairns warned manufacturers selling directly through Amazon risked “cutting their own throats” by handing the US online giant the power to dictate their product’s price.

And eBay Australia boss Tim MacKinnon has told ­retailers that selling their products on Amazon puts them at risk of having them ripped off for a cut-price Amazon private­ label range.

“We let every retailer big and small compete,” he said.

“Where you get players that try to use the data they get and then decide to go and retail those items themselves, that’s where it becomes a little unfair. We will be watching that carefully.”

Meanwhile, retail billionaire Gerry Harvey has said he will “wait and see” what Amazon’s prices are like before deciding whether Harvey Norman will price-match. “I don’t know yet,” he said.

But he did say he was “a bit flabbergasted” as to why Amazon would launch just before Christmas, when “most people don’t want to buy online because they’re scared” they won’t receive the items in time.

Amazon’s media spokesman in Luxembourg did not comment. A PR company on behalf of the giant said Amazon paid “all the taxes we are required to pay”.