14 DAY TRIAL // The era of bypassing full taxes in Germany and UK by funneling the money through its Luxembourg branch has come to an end for the American online retailer.
According to a report from Nasdaq, the company was forced to disrupt its immoral practices following a wave of pressure from the EU regulators requesting that the e-commerce company put an end to its controversial means of avoiding individual taxes for each country it operates in.
The decision is also a result of chancellor George Osborne’s diverted profits tax, generally known as the Google tax, which was specially designed to prevent US companies from cutting tax bills. The highly-debated tax forces multinationals to pay 25 percent of the profits made in European countries.
Tech companies are expected to cede to pressure
Although Amazon is the first company to take the big step, others such as Google or Facebook are prone to follow in its tracks given that they are using similar strategies to save tax money.
Starting May 1, the e-commerce company has started booking revenues in the UK, and Germany, respectively, avoiding Osborne’s retaliatory DPT. Now, other countries as well are seriously considering implementing the tax in order to boost their economy and provide equal conditions for all competitors.
Google, for instance, came under scrutiny in France on claims that it is avoiding paying the owed taxes by recording its revenues in its Dublin headquarters.
In a period of conflict between European authorities and the likes of Google, Amazon has made a decisive move in the American corporations’ tax-reduction strategies, as regulators are now prone to put more pressure on other companies as well to follow the lead.
The good news for the e-commerce site is that it won't have to backdate its payments given that the law came into effect in April.
The bad news for Amazon is that more and more European countries are going to want to cash in on this lucrative rule and start forcing he tech giant to stop routing their taxes. And corporations will have no other option but to go with it if they want to avoid the 25 percent annual levy.