Baku, February 15, AZERTAC

Tech giant hit by total claim worth €3bn amid investigation over sale of goods from non-EU countries including China.

According to Financial Times, Italian tax authorities have accused Amazon of evading €1.2bn in VAT payments, in the latest effort by European authorities to scrutinise the business affairs of US Big Tech groups in the continent.

The claim is linked to the sale of goods from China and other non-EU countries purchased through its platform from 2019 to 2021, according to three people familiar with the investigation.

The US-based tech giant has been hit with a total claim for €3bn — the original tax, interest and penalties — linked to the alleged tax fraud, which took place as the EU was overhauling its process for collecting VAT on imported goods sold online to European consumers.

Amazon, which is contesting the claim, said it would not comment on “ongoing investigations” but that it was “committed to complying with all applicable tax laws”.

The company also said that its business generated more than €1.4bn in direct and indirect tax revenues for Italy’s public coffers in 2023.

The massive tax claim against Amazon comes as Donald Trump has railed against the treatment of US companies by the EU and its member states. The new US president has singled out the bloc’s widely used VAT tax system for particular ire.

The Amazon dispute in Italy stems from the sale of imported goods — including low-value items worth less than €150 each — to consumers in the country by third-party sellers on Amazon’s marketplace, during a transition period when the EU was in the midst of changing its process for taxing online sales.

The reforms, which were approved in December 2017, aimed to simplify the ease of doing business in Europe, while reducing the then estimated €5bn lost each year due to VAT evasion on the imports of low-value goods.

Under the old system, the EU required every individual seller to register to pay VAT in each country where they sold goods. Under the revamped rules, which took full effect in 2021, tech companies became responsible for the collection and payment of VAT on all items sold on their platform.

The EU’s new rules also ended a long-standing tax exemption for the online sale of imported items worth less than €150, which had disadvantaged European businesses against foreign rivals.

However, in 2019, before the new EU-wide system took full effect, Italy passed a national law that began to hold tech companies liable for any tax evasion by third-party sellers that used its platform — the provision that underlies its current tax claim.

Italy’s financial police, the Guardia di Finanza, analysed 7bn financial transactions carried out through Amazon between the passage of the new Italian law in 2019 and the start of the new EU system in 2021 and found that VAT payments worth an estimated €1.2bn had been evaded, according to people with knowledge of its findings.

Authorities said that Chinese sellers accounted for about 70 to 80 per cent of all goods sold online in Italy.

At a meeting in Rome several months ago, numerous American companies operating in Italy complained to then US commerce secretary Gina Raimondo about Italian tax authorities’ unpredictability, and their interpretation of tax rules to target big foreign businesses for more money for the cash-strapped government.