Corruption : Amazon Style (Gangam)
Inside Project Goldcrest:
Amazon’s motives behind Project Goldcrest were clear from the outset, according to the IRS. In a memorandum filed in the Seattle case, tax inspectors claim that when Amazon weighed up the costs and benefits of implementing the scheme, its finance staff “did not quantify any benefits other than avoided US corporate income taxes”.
The IRS has questioned the legality of methods used by Amazon to devise complex intercompany contracts that transferred intangible assets – vital software, trademarks, marketing assets such as branding for its website – to one of its Luxembourg companies, a so-called “pass-through” entity not taxed in the Grand Duchy.
Amazon has vigorously contested the IRS’s claims in the case, which could have significant financial implications for the company. Overall, the IRS has moved to recover $1.5bn in back taxes from the company, plus interest, dating back to 2005-06, when the company implemented Project Goldcrest.
The dispute centres around “transfer pricing”, which multinationals use to value the goods and services shifted around the group structure. Companies are required to establish a transfer price that is market based, as if it were selling the service to a separate company.
In the memorandum, the IRS contends that Amazon used “unrealistically low values” to transfer its assets from the US to Luxembourg, and its valuation of these assets was the “product of counterfactual and legally baseless assumptions”. The memorandum also attacks Amazon’s subsequent justification of its methods as “arbitrary” and “plainly an exercise in futility”.