Amazon in Trouble?

One of the world’s biggest online marketplace, Amazon, has created yet another controversy in Australia. This time, it is for paying lower tax to Australian authorities by using various tactics of tax evasion to legally reduce the income taxes. World’s Second Richest man and Amazon CEO, Mr. Bezos, has adopted a similar structure chosen by many other technology giants including Facebook and Google. This revenue structure includes recording billions of dollars as an offshore revenue.

Amazon received over $1 Billion of combined revenue from its three local subsidiaries in Australia, 2018. However, the subsidiaries had only paid a combined tax bill of only $20 Million.

The governments worldwide are trying to stop the tech giants from artificially shifting their profits in order to pay less taxation as the tax is calculated based on the actual profits of the firms, not based upon their revenues. However, Amazon gets a higher hand since it is not a publicly listed company on the ASX (Australian Securities Exchange) and therefore, it records a very limited financial information. When questioned if the company in being charged by the Australian Taxation Office (ATO), Amazon spokesman said, “We pay all applicable taxes in Australia and every country where we operate.”

Despite Governments giving their tax agencies more power to grind multinationals across the globe, taxing tech giants is a complex game. Many European countries across the globe proceeded with the idea of taxing digital companies based upon their revenue rather than their profits. Australia had earlier tried the idea of tax on the revenue of digital companies, however; it stepped back and pulled out eventually.

Looking at the rising number of disputes between Governments and Tech giants, it is certain that we will soon witness major changes in Global tax system around the world.