European regulators launched an investigation into Amazon’s tax dealings Tuesday, inflaming concerns that U.S.-based companies operating overseas are taking advantage of legal loopholes to dodge higher tax rates.
The European Commission, the governmental body tasked with proposing legislation and enforcing the European Union’s treaties, will determine whether Amazon complied with trading agreements and rules, Reuters reported. If found guilty, Amazon would have to repay millions of uncollected tax funds.
Amazon has been receiving local tax subsidies since 2003 thanks to a Luxembourg tax ruling that reduced the company’s profit taxes. European regulators worry that such a deal could give Amazon an economic advantage because it pays less taxes than other companies as a result.
The European Union has started to crack down on U.S. companies operating abroad looking for tax breaks. Apple is also being investigated in Ireland for avoiding billions of dollars in taxes. The European Commission suspects Apple is paying a pittance in Irish taxes — at a 2 percent rate — instead of the normal 12 percent corporate tax for doing business in the country. Depending on the Commission’s ruling, Apple may have to pay a record fine amounting up to several billion euros, or the Irish government could be forced to change its tax laws.
But tech and non-tech companies alike have been known to exploit legal loopholes to keep prices low and profits high. American companies stow nearly $2 trillion offshore to avoid paying taxes to the U.S. Treasury, costing the U.S. about $300 billion a year in tax revenue.
Amazon has also caught flack for paying low wages and fostering abusive work conditions to keep product prices low. Thousands of German Amazon workers went on strike in September to protest working conditions and negotiate better wages. Amazon forced its warehouse employees to work in extremely hot indoor temperatures under threat of being fired for lax productivity, according to a 2011 report.
The online retailer’s abysmal work conditions have also allegedly made employees physically and mentally sick, as revealed by an undercover investigative reporter who filmed the work environment after taking a job in a Wales-based warehouse. A documentary released in July called “Amazon Rising” also depicts the company’s harsh working conditions — one former employee even likens Amazon to a prison. According to the interviews, workers were timed on nearly every task including bathroom breaks, retrieving merchandise and packing boxes.