As Amazon became Canada’s largest online retailer, the Seattle-based company crafted a strategy that would limit how much of its profits were taxed by the federal government
used a complex web of subsidiaries for years as part of a corporate strategy to limit taxable profits in Canada, according to documents that governed employee behaviour at the company during its rise to dominance as the country’s largest online retailer.
The company recommended restrictions on corporate travel for employees, who were instructed not to spend more than two consecutive weeks or more than 182 days a year in Canada, the documents allege, or else profit from Amazon’s operations in this country might be taxed here. The company also instructed staff not to have dedicated workspace in Canada, or to ask anyone here to order an Amazon product or sign up for its services while those employees were on Canadian soil.
“The tax laws in Canada are designed to encourage companies to invest and invent, and we’ve done just that – investing more than $6-billion in the country in 2020 alone,” said Kristin Gable, a senior manager of corporate communications for the company in Canada, in an e-mail. “As we do everywhere we operate, we pay all taxes owed under the law, and we also generate significant additional tax contributions from others through our job creation, investment and ongoing operations.
Amazon has run into difficulty in at least one other country by using a similar strategy. In 2009, tax authorities in Japan ordered Amazon to pay the equivalent of US$119-million in back taxes from 2003 through 2005 for sales in the country that flowed through a U.S. subsidiary. Ms. Gable also said that Amazon’s Canadian retail operations are, at present, managed by some people based in Canada, some in the U.S., and the company plans to continue hiring locally.
, which the company ran like an Olympic-bid contest. Nearly 240 jurisdictions applied to host “HQ2,” many of them offering millions or billions in tax breaks and other incentives. In 2018, New York and Northern Virginia won after offering nearly US$3-billion and more than US$500-million in incentives, respectively – though the company eventually cancelled its New York plans after massive pushback from local residents and politicians over the plans for public funding.
But inside Amazon’s Seattle headquarters, just a 2½-hour drive south, staff overseeing its Canadian retail operations were working with explicit instructions to reduce the chances of this arm of the firm having to pay corporate income taxes north of the border. “How can we allow one of the biggest corporations in the world to sell goods and services across this country – with potentially tens of billions of dollars in revenue – to keep secret its actual revenue, profits, taxes and other country-level financial information?” he asked.
Jennifer Carr, president of the Professional Institute of the Public Service of Canada, said international firms frustrate CRA staff because they book profits from Canadian commerce in other tax jurisdictions – strategies that are legal, but nonetheless “shady, unsettling and unfair,” she said in an interview. While the union has pressed senior leaders at the CRA to pro-actively make changes, ”they haven’t heard us,” Ms. Carr said.
Canada is not alone in struggling to collect tax revenue from companies selling goods and services to its citizens from abroad. that would establish a near-global minimum corporate profit tax rate of 15 per cent. The pact would also give greater powers to governments to tax large multinationals by at least that rate in the countries where they actually conduct business.
The OECD has all but admitted it’s powerless to include Amazon in its profit-shifting regime; Pascal Saint-Amans, the organization’s tax director,he hoped to force AWS on its own to comply with the program. In Canada, this still wouldn’t make a case for taxing Amazon’s retail profits because of the slim margins involved.
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