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Amazon in $234m US tax dispute

The US Internal Revenue Service claims Amazon owes $234m in tax dating back to 2005

ONLINE RETAILER Amazon is fighting the US Internal Revenue Service over a $234m (£145m) international tax bill, reports Reuters.

The dispute pertains to allegedly unpaid taxes for 2005 and 2006, while the US Revenue is also contesting tax deductions Amazon claimed on its net operating losses, among other issues, according to a court filing made on 28 December.

Amazon publicly revealed in April 2011 that it faces $1.5bn in further taxes over a seven-year period from 2005, according to a filing made by the Securities and Exchange Commission (SEC).

Part of the dispute involves transfer pricing, whereby multinational corporations value goods and services moving across international borders from one corporate entity to another. These transactions often see the corporation’s global tax costs driven down.

Amazon argues the US Revenue is overestimating the value of Amazon’s intangible property, such as its software and trademarks, while the Revenue contends the retailer’s European subsidiary made taxable payments to the US parent company.

The US Revenue’s calculation is based on an estimation method overturned in a similar 2009 court decision involving Veritas Software Corp, now part of Symantec Corp, according to Amazon.

That estimate was partly drawn from a report conducted for the Revenue by transfer pricing consultancy Horst Frich.

According to Amazon, Horst Frich was contracted by the Revenue to analyse Amazon’s transfer pricing figures.

As the case was filed with the US Tax Court, Amazon is not required to pay the tax bill until the outcome of any decision is clear, and an out-of-court settlement could yet be reached.

The retailer has faced tax controversy in the UK, too, with European director of public policy Andrew Cecil roundly criticised by the Public Accounts Committee for his lack of “serious” responses to questions about the company’s tax practices.

Update 18/01/2013: Amazon declined to comment while litigation is ongoing.

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