Germany is an important market for Amazon and it’s growing fast. In 2017, Germany was the second biggest market behind the US, with sales of $16,951 million, followed by the UK with $11,372 million. The average annual expenditure per head on Amazon was £158.2 in Germany, slightly ahead of the UK, which averages £130.6 per head.
Despite good sales figures in Germany, the company has to deal with periodic media reports about bad working conditions, union strikes, dictating prices, tax avoidance, and pressure on publishers. Furthermore, Amazon has to face a new law on taxes, which will come into effect next year.
Bill on turnover tax
In August, the German Federal Ministry of Finance presented a bill against tax fraud on the internet. As early as January 2019, all operators of electronic marketplaces, such as eBay or Amazon, will be required to collect certain data from the dealers who do business on their platforms. This includes name, full address, tax number, shipping and delivery address as well as time and amount of sales. In addition, operators of platforms will be liable if dealers do not pay their sales tax, making it more likely that traders who don’t pay will be excluded from marketplaces.
High loss in tax revenue
It is reported that more than 24,000 sellers on the German Amazon marketplace originate from China or Hong Kong and use the site to avoid paying 19% sales tax. According to conservative estimates by the German Federal government, hundreds of millions in sales tax is not being paid to the state every year. Campaign group The German Tax Union estimates it to be at least €1 billion a year.
The Federal Ministry of Finance stated that the new bill on turnover tax should create a fairer tax system, secure revenues and prevent overseas sellers from distorting competition. For the customers, there are no changes as they are already paying the sales tax. There is an EU-wide regulation planned for 2021.
Tax changes don’t always work
Since May 2015, Amazon no longer books its German sales in Luxembourg and actually pays taxes on its profit made in Germany. However, the new tax model did not bring large tax revenues, because Amazon allegedly makes small profits. In the UK, the company followed a similar approach with a British subsidiary of Amazon EU.
Destroying new goods
In June, German national weekly Wirtschafts Woche and German national public broadcaster ZDF revealed a scandal: every day, masses of articles of all kinds are disposed of in Amazon’s German logistic camps. Many goods such as refrigerators, washing machines, cell phones and furniture, worth several tens of thousands of euros have been destroyed, despite often still being usable, functional and sometimes even new products.
Amazon did not deny destroying the goods but referred to improvements that had been made in the process. The company said it was trying to destroy as few goods as possible by reselling through Amazon Warehouse, donations, recycling and delivery to second-hand sellers.
Jochen Flasbarth, undersecretary in Germany’s Federal Ministry of the Environment, has urged Amazon to clarify these allegations: “This is a huge scandal. We are consuming these resources despite all the problems in the world.” The former Federal Minister of the Environment, Klaus Töpfer, described Amazon’s procedure as “irresponsible”.
Environmental organisation Greenpeace called for action: “We need to implement a law on banning the waste and destruction of first-hand and usable goods”, demanded Greenpeace’s Kirsten Brodde.
However, not everyone sees the responsibility as lying only with Amazon. Catherine Hoffmann, author at the daily newspaper Süddeutsche Zeitung comments that the criticism of Amazon is hypocritical and that anyone who sends in bulk goods is complicit in mass destruction. She argues that one of the origins for Amazon’s actions is the customer’s shameless exploitation of the two-week right of withdrawal. Approximately 280 million returns are estimated to be sent annually in Germany. She suggests that merchants must demand money for returns – and if necessary be forced to do so.