Originally Posted by JoeD
I do agree that if a company is running as a "shell" for the sole purpose of been run at cost or a loss in order to bolster the revenue of a company based outside the same country that needs looking into and laws changing. However, that's not what Amazon is accused of/doing is it?
Yes, they do something very similar.
They set up a company called 'Amazon Europe Holding Technologies', as a type of Luxembourg company that is free from taxes.
It then set up a taxable Luxembourg company called 'Amazon EU SARL'.
It transferred ownership of all its European operations to SARL.
It then 'transferred' all its intellectual property to Holding.
SARL used to pay licensing costs to the US division which used to hold the IP. That meant those payments were liable to be taxed in the US. Now it pays Holding instead. Holding pays less than half of that back to the US division, and the rest stays, tax-free, in Luxembourg.
With all the cash accumulated in Holding, Amazon lends money to SARL. The interest SARL pays reduces its profit, and thus tax rates, but Holding pays no tax on the interest received.
Edit: All of the profit from sales on Amazon UK actually goes to SARL, at Luxembourg tax rates. Amazon UK just act as a fulfillment company and are paid for their services.
(Despite the fact that there are 15,000 employees in the UK and only 500 in Luxembourg)
Edit: Other, more amusingly named tax avoidance strategies include the Double Irish and the Dutch Sandwich
And yes, to answer another post, at least in the tech world you would have noone left to do business with if you avoided companies using these strategies. Amazon, Apple, Google, Microsoft, Oracle, all use them.