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IRS Looses $1.5 Billion Tax Dispute To Amazon


03/25/2017


IRS Looses $1.5 Billion Tax Dispute To Amazon
A case over transactions involving a Luxembourg unit that was done more than a decade ago, was won by Amazon.com Inc and along with that the U.S> based world's largest online retailer won a more than $1.5 billion tax dispute with the Internal Revenue Service.
 
The IRS was found to have, on several occasions, abused its discretion or acted arbitrarily or capriciously by Judge Albert Lauber of the U.S. Tax Court who rejected a variety of arguments put forward in the case by the agency.
 
However how much tax Amazon would now have to pay up was not immediately clear from the decision.
 
The case could boost its federal tax bill by $1.5 billion plus interest and the case involved transactions in 2005 and 2006, the world's largest online retailer has said on earlier occasions. Howe the company had also said that in later years, a loss could add "significant" tax liabilities.
 
Noting four times what it made in the four prior years combined, on revenue of $136 billion, Amazon made just $2.37 billion of profit in 2016.
 
Colin Sebastian, an analyst at Baird Equity Research said that Lauber's decision "should shield Amazon from potentially significant tax obligations to the IRS covering years beyond the ones covered in the lawsuit."
 
There were no comments from Amazon and its lawyer John Magee, a partner at Morgan, Lewis & Bockius and there were also no comments available from the IRS.
 
Once accusing Amazon on Fox News of "getting away with murder tax-wise", President Donald Trump had contended that Amazon, run by billionaire Jeff Bezos, failed to pay enough taxes, before he had entered the White House.
 
When different units of multinational companies transact with each other, it gives rise to "transfer pricing," and the IRS case involved "transfer pricing".
 
the value of "intangible" assets, such as software and trademarks, it had transferred to a Luxembourg unit, Amazon Europe Holding Technologies SCS,, had been ver estimated by IS, Amazon had argued.
 
To have the "vast bulk" of income from its European businesses taxed in Luxembourg at a "very low rate", Amazon did this through a plan called "Project Goldcrest",  Lauber said.
 
Amazon's dealings were not all done at "arm's length," or else improperly lowered its domestic tax bill, the IRS countered.
 
"This is good for everybody, not just Amazon," said Michael Pachter, a Wedbush Securities analyst who has practiced tax law. "It reaffirms that the tax law permits wholly-owned subsidiaries can license intellectual property" as Amazon did. "Totally legal, totally legal."
 
If authorities in Brussels conclude that prior rulings by Luxembourg tax officials amounted to improper "state aid" that gave it an unfair advantage over rivals, Amazon has said it may face additional tax bills in Europe.
 
Amazon has said that a formal probe into those rulings began in October 2014.
 
(Source:www.reuters.com)