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US taxman joins UK politicoes on hunt for Amazon cash

Who would you be more scared of?

Amazon is fighting the US taxmen over a $234m unpaid bill.

The Internal Revenue Service (IRS) told the online superstore in November that it owed taxes in 2005 and 2006, and also challenging its tax deductions, according to a court filing seen by Reuters.

But Amazon has countered that the IRS is overestimating how much its "intangible assets", such as software and trademarks, are worth, which would also affect tax figure calculations.

The IRS is concerned about the web bazaar's "transfer pricing", which is a neat little tax dance in which corporations buy something the whole company needs in one country and then charges its regional branches to buy it off them, often at a markup.

For example, if Amazon in the US were to buy packing boxes at 50p each and then sell them to Amazon UK at £1 each, that price comes off the UK subsidiary's tax bill as an expense, saving the company as a whole some money. Obviously there has to be some change in the cost since the US is now shipping these boxes to Britain for Amazon UK's use, but in grey areas, companies have been known to make some money.

This kind of legal tax chicanery was the subject of UK politicians' probe into the corporate taxes of Amazon, Google and Starbucks at the end of last year. ®

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