23 October 2018
Amazon has been accused by President Donald Trump of 'getting away with murder tax-wise'. Photo: Reuters
Amazon has been accused by President Donald Trump of 'getting away with murder tax-wise'. Photo: Reuters

Amazon wins US$1.5 bln tax dispute over Luxembourg unit Inc. on Thursday won a US$1.5 billion tax dispute with the Internal Revenue Service over transactions involving a Luxembourg unit more than a decade ago.

Judge Albert Lauber of the US Tax Court rejected a variety of IRS arguments, and found that on several occasions the agency abused its discretion, or acted arbitrarily or capriciously, Reuters reports.

Amazon’s ultimate tax liability from the decision was not immediately clear.

The world’s largest online retailer has said the case involved transactions in 2005 and 2006, and could boost its federal tax bill by US$1.5 billion plus interest. It also said a loss could add “significant” tax liabilities in later years.

Amazon made just US$2.37 billion of profit in 2016, four times what it made in the four prior years combined, on revenue of US$136 billion.

Lauber’s decision “should shield Amazon from potentially significant tax obligations to the IRS covering years beyond the ones covered in the lawsuit”, said Colin Sebastian, an analyst at Baird Equity Research.

The IRS declined to comment. Amazon and its lawyer John Magee, a partner at Morgan, Lewis & Bockius, also declined to comment.

Before entering the White House, President Donald Trump contended that Amazon, run by billionaire Jeff Bezos, failed to pay enough taxes, once accusing it on Fox News of “getting away with murder tax-wise”.

The IRS case involved “transfer pricing,” which arises when different units of multinational companies transact with each other.

Amazon argued that the IRS overestimated the value of “intangible” assets, such as software and trademarks, it had transferred to a Luxembourg unit, Amazon Europe Holding Technologies SCS.

Lauber said Amazon did this through a plan called “Project Goldcrest,” to have the “vast bulk” of income from its European businesses taxed in Luxembourg at a “very low rate”.

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