The European Commission is looking to propose a sales tax reform that is levied in the European Union to tackle fraud and curb companies’ excessive tax planning on Wednesday, which could definitely affect U.S. online retailer Amazon.com, Inc. (NASDAQ: AMZN). The EU campaign wants a fairer corporate taxation following revelations that many firms exploit loopholes in the market so that they could pay little or no tax in Europe.
A value added tax (VAT) is to be proposed in a cross border trade that will be charged at the rate set by the country where the buyer is located instead of the seller’s home. Billions of euros of tax revenues are lost to some EU states each year and the plan is to reduce that number while also eliminating the incentive for exporting businesses to base themselves in countries that have low VAT rates.
The reform is likely to increase tax bills of supplier companies that serve the EU market from a single low rate country such as Amazon. The EU also wants to impose higher corporate taxes on the company, accusing them of paying too little. The VAT will continue to be paid to the countries where businesses are located but will only be charged by the states of the destination of the good.