Forget Google – France just hit Amazon with $252M in back taxes

Nov 13, 2012
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French Tax lawsThese days in France, all we read about in France is the French government’s ongoing pursuit of the coffers of Google, who pay as little as 2% taxes on the revenue generated by  French customers; however, Reuters shifted the attention towards another tax-optimized giant, Amazon, who has been hit with back taxes to the tune of $252 Million. The back taxes claim to be for revenue generated by Amazon.fr with french customers between 2006-2010, a similar claim to the one which France is currently using in its investigation of Google France, who it claims generates $1.7B revenue in France that has been claimed by its European HQ in Dublin, Ireland.

‘”We disagree with the proposed assessment and intend to vigorously contest it,” the company said in its third quarter results filed last month.’ Source: Reuters

The money in question is registered as revenue by Amazon’s Luxembourg office, which has significantly more beneficial tax laws than France, and is about 1.5 hours by train from Paris. French officials will be looking to prove that revenue registered in Luxembourg in fact came from deals made between French clients and Amazon France, thus requiring the revenue to be registered in France. Amazon is just one of many companies in France who are being investigating for similar tax setups in France – Microsoft, Facebook &, of course, Google all have some form of the “Double Irish” tax schema in place.

France v. Amazon – France’s Convenient Alzheimer’s

The current economic crisis means that France is turning over a lot of rocks that it would’ve probably like to have left unturned – I feel the “our government is too big” conversation is just around the corner, but until then, France has to go back on a few promises that the previous president made with the American multinationals. Just a few months ago, Amazon announced it would be opening a new fulfillment center in Burgundy, adding to its two logistics center in Orleans and Montelimar. This came after a push from the French government, so you can imagine their were some tax incentives laid on the table in order to bring “1000s of jobs” to France in a time where layoffs are the norm in a country where it’s hard to fire.

The same goes for Google, whose chairman Eric Schmidt cut the rope on their new Google France office, situated in the real center of the Paris’ startup scene - this moves seemed to be heavily pushed by the French government, and now just 6-12 months later the new French government is coming back around asking for more – this time with a threat that could set international precedent. Not cool France, not cool.

I liken the French government’s convenient Alzheimer’s of deals made while Sarkozy was in office to when one gang kills and takes over another gangs territory – sure, the corner store may have made its monthly payments to the old mafia, but the new mafia is here now. You won’t get your money back from the old mafia, and you’d better pay up to the new mafia fast – didn’t you see the blood in the streets?

Tax evasion isn’t the real issue – Europe is

The question will be addressed eventually, it’s only a matter from what position France tackles it – an offensive one or a defensive one. The question: How do you justify taxes in one country being more than double that of its neighbor, when it’s becoming increasingly easy (thanks to the European Union) to operate fluidly between European countries?

Right now, France’s global competitiveness is coming into question, as is its role in the European Union. Eventually, it seems, either European countries will have to create a unified tax law, at least in terms of international businesses – then again, they can always dissolve the European Union. That seems closer to a reality than having unified tax laws between France and the UK.