Is Tax Compliance a Challenge for eCommerce Giants?

As the world of e-commerce continues to expand, so does the opportunity for tax compliance issues.

The problem of online tax compliance is not new, but it has become a more pressing issue as more and more companies turn to e-commerce. So far there have been a few cases where major companies have been prosecuted for tax fraud. One example was Amazon last year being fined by French authorities for $252 million in undeclared taxes. Yet, many other companies are just beginning to catch on to appropriate taxation laws and with such rapid growth one can only anticipate that these laws will soon be enforced with increased vigor.

The difficulty with e-commerce is that it is a very fluid business with goods often being shipped to different jurisdictions and resold in many different channels. This issue of tax jurisdiction has become a problem for e-commerce giants, who are expected to comply with a long list of tax laws in the different markets across the globe.

As online tax compliance becomes a bigger issue, companies are working hard to prevent any kind of misunderstanding between them and the respective tax authorities. One such company is eBay. Recently, eBay named its first chief compliance officer who will play an important role in further expansion of their services by providing professional advice on all legal aspects related to taxation matters.

A number of online companies have been penalized for tax evasion. For example, Amazon was fined $252 million for tax evasion in 2013. In the same year, Apple was found to be evading taxes from their European subsidiaries with a total fine amounting to €13 billion.

According to experts, around 40% of all these cases related to e-commerce and there are potential issues that could occur in the future. In fact, in recent years there has been more focus on taxation issues following the investigations into large corporations such as Apple and Amazon.

The European Commission said that Amazon had been accused of avoiding corporate tax payments in the European Union. It was also alleged that Amazon participated in a sweetheart tax deal with Luxembourg, which allowed the company to reduce its tax bill by hundreds of millions of dollars.

Amazon has consistently denied any wrongdoing. In fact, the company offers similar services to all retailers across the globe, and it is simply following local laws and regulations in order to best serve all its clients. Given that Amazon is such a big company with a reputation to uphold, it is likely to be following whatever local laws say about taxation matters. Tax laws often change, especially in a country such as the European Union where there are a large number of countries that all have different tax structures.

While Amazon has been at the center of a lot of controversy lately, it is important to remember that this case was not the first time that an e-commerce giant has been accused of tax evasion.