Amazon under fire in Germany for low tax bill

The German market earned Amazon around €6.8bn in 2012 – however because of European tax rules, the company only paid €3m in taxes in the country. German politicians are now calling for a change in tax law.

Amazon is hugely popular with German consumers: according to German newspaper Sueddeutsche Zeitung, Amazon earned more than €6.8bn in 2012, cornering one-quarter of the online retail market in Germany. German politicians, however, are not so thrilled about Amazon's success: Amazon paid just €3m in income tax for that year.

To avoid relatively high German taxation, Amazon is channelling its business through its Amazon Europe Holding Technologies, based in Luxembourg, where the income tax is a lot lower. (Under the legal arrangement, when a European customer makes a purchase, they are buying from the Luxembourg company, with the order then fulfilled by Amazon's local subsidiary. As a result, the sale is chalked up to the Luxembourg unit, where it is taxed.)

The holding company reported €118m in profits in 2012 (in Germany, Amazon reported only €10m profit), but because of a tax-exempt partnership, it did not have to pay any income tax, Reuters reports.

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German politicians have long called for a change in European tax laws and a shift in the way that international corporations are able to shift profits around.

Sven Giegold, a member of the Germany’s green party and politician at the European Parliament, told Reuters that there is a need for a tougher approach on part of the German authorities.

"I am outraged," Giegold said. "We have to use much stronger means to ensure the profit cannot be moved out of the country," he added. He also said he plans to take up the matter with Germany's finance minister Wolfgang Schaeuble. "It's not enough to make a speech at the G20 and then be inactive on extreme cases [of tax avoidance]," Giegold told Reuters.

Amazon did not comment on Giegold's statements, but said it follows all tax laws in the countries where it operates. In an earlier statement, the company said it operates its European business with all strategic functions out of its Luxembourg headquarters.

Amazon has also been under attack by German trade union Ver.Di because of its refusal to join a collective agreement regulating wages and working conditions. There have already been a number of strikes at German Amazon facilities as a result.

The company employs more than 9,000 people in Germany across eight sites. Although the strikes did not impact Amazon's business operations, the company remains under pressure from workers.

And it's not just Germany that's taken an interest in Germany's tax affairs: the UK and France have also slammed firms like Amazon for tax avoidance schemes. A French-led plan to deal with the problem is expected to be presented at a G20 meeting this week , though in a watered down form after US objections.