Amazon avoids $1.5bn US tax bill in court ruling

Judge rules it legal for internet giant to funnel European sales through Luxembourg

Harriet Agerholm
Saturday 25 March 2017 15:38
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If it had lost, Amazon said it could have faced 'significant' tax liabilities in future years
If it had lost, Amazon said it could have faced 'significant' tax liabilities in future years

Online shopping behemoth Amazon has avoided a $1.5bn (£1.2bn) tax bill after winning a legal dispute in a US tax court.

Judge Albert Lauber rejected a variety of arguments presented by the Internal Revenue Service (IRS), bringing to an end a lengthy court battle.

Ruling in favour of the world’s largest online retailer, he said it was legal for Amazon to have funnelled its European sales through a low-tax Luxembourg sub-company in 2005 and 2006, instead of the US.

Amazon said that if it had lost it could have had been forced to pay a US tax bill as high as $1.5bn and potentially faced “significant” tax liabilities in the years to come.

The company – which according to Forbes is the world’s 12th most valuable brand – made $2.37bn of profit in 2016, four times what it made in the four previous years combined.

Colin Sebastian, an analyst at Baird Equity Research told Reuters the ruling “should shield Amazon from potentially significant tax obligations to the IRS covering years beyond the ones covered in the lawsuit."

Yet Amazon could still face additional tax bills in Europe if Brussels officials choose to take further action.

Luxembourg is known as one of the world's biggest tax havens, offering heavy discounts on corporate taxes that have attracted global companies such as Pepsi and Apple.

During his Presidential campaign, Donald Trump criticised Amazon for not paying enough in tax. The online retailer’s chief executive, Jeff Bezos, responded angrily to the claims, triggering a social media battle.

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