Amazon settles tax optimization dispute with French authorities

Amazon has signed an undisclosed deal with the French tax authorities, Amazon told the AFP. From 2006 to 2010, Amazon operated in France using its subsidiary in Luxembourg. This way, the company could pay less taxes. But French authorities think French sales should be taxed in France. That’s why they were asking for $252 million in unpaid taxes (€203 million).

Both Amazon and the French government didn’t comment on the amount of the fine. It’s possible that Amazon eventually paid less than $252 million.

According to the company, Amazon has created a subsidiary in France since then so that French revenue is taxed in France. So the Luxembourg issue shouldn’t come up again.

The company also told the AFP that it has spent quite a bit of money in France. 5,500 people work for Amazon in France. Amazon has invested $2 billion in France in total.

It’s interesting to see that tax authorities managed to avoid a public fight. The main issue with those big fines for tax optimization is that they can damage the reputation of a country. It’s hard to invest in a country where you get fined.

And yet, if only big tech companies paid taxes in each country where they operate… European Finance Ministers have been working on a new piece of legislation to force tech companies a bit.

According to the AFP, we’ll hear more about this new regulation in March 2018. Early drafts suggested that European tax authorities will look at overall revenue and not just profit.

For instance, if a big tech company such as Google, Amazon or Facebook reports $2 billion in revenue in Germany but only $10 million in profit, it doesn’t add up — when you look at earnings report, you can see that tech companies have quite a big gross margin. So tax authorities will use the bigger figure to calculate fair taxes.

With that upcoming change and today’s news, Google is probably relieved. The company has been facing a huge $1.3 billion fine for tax noncompliance in France. It seems like the French government now wants to settle those issues behind closed doors.