Can Amazon Shake Off These Allegations?
European regulators are not the only authorities coming after Amazon (NASDAQ:AMZN) for alleged tax avoidance. The U.S. Internal Revenue Service has determined that the company owes the agency $234 million in back taxes, a charge the Internet retailer has contested.
A December 28, 2012, court filing seen by Reuters said the IRS was objecting to the method Amazon used to calculate taxes for its net operating losses and for cash transfers made between the parent company and its European subsidiaries. The IRS was particularly focused on Amazon’s method of “transfer pricing” its products. “Transfer pricing” describes how multinational corporations price products and services that are sent from one business unit to another across international borders. This practice often allows companies to lower their total tax burdens, and costs governments millions of dollars.
In response to the allegations, Amazon has contended that the IRS overestimated its “intangible property”, such as computer software and trademarks, according to the filing.
But there are more worries. Starbucks (NASDAQ:SBUX) has already settled tax avoidance claims in the United Kingdom and Amazon may be the next one to be investigated by the U.K. parliament’s Treasury Select Committee. The Telegraph reported in early November that Amazon, Facebook (NASDAQ:FB) and Google (NASDAQ:GOOG) had paid only 30 million pounds in taxes together, even though they have made sales of 3.1 billion pounds. The claim was originally reported in the trade publication Tax Analysts and confirmed by Reuters.
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