In a significant crackdown, Italian authorities have seized €121 million from a Milan-based branch of Amazon. This move follows allegations of tax fraud and worker exploitation through an illegal subcontracting scheme, according to an investigation by the Milan prosecutor’s office. The probe has uncovered a complex network of illegal practices aimed at reducing labor costs and evading taxes, casting a spotlight on the e-commerce giant’s operations in Milan.
The Allegations: Tax Fraud and Worker Exploitation in Milan
The crux of the investigation centers on the alleged use of “labor reservoirs.” This system allows large companies to subcontract logistics services to other firms and cooperatives, effectively cutting labor costs and reducing tax liabilities. These subcontracted companies in Milan are accused of systematically avoiding the payment of value-added tax (VAT) and social security contributions, resulting in significant financial savings for the primary contractor—in this case, Amazon.
According to the state-run ANSA news agency, the Milan prosecutors described an “illicit mechanism of invoices” for non-existent transactions under various fake contracts for labor supply. This scheme involved the issuance and use of false documents to create a facade of legitimate business operations. The “labor supply chain” was reportedly screened by “filter” companies, which in turn employed several cooperative companies. These cooperatives were instrumental in omitting the payment of the required VAT and social security charges.
Amazon’s Response
In response to these serious allegations, Amazon has maintained its stance of compliance with all applicable laws and regulations. In an emailed statement to Euronews, Amazon said, “We comply with all applicable laws and regulations where we operate and demand that companies working with us do the same.” The company further emphasized its commitment to high standards and an established Supplier Code of Conduct that partners must follow.
The statement continued, “We hold ourselves and our partners to the highest standards and require adherence to our established Supplier Code of Conduct to work with us.” Amazon also expressed its willingness to cooperate fully with the ongoing investigation by Milan authorities, highlighting its efforts to ensure ethical and legal business practices.
Broader Context: A Pattern of Corporate Scrutiny
This investigation into Amazon is part of a broader effort by Milan prosecutors to clamp down on similar illegal practices by major corporations. Other companies, including DHL, Uber, and Lidl, have also been targeted for similar issues. The Milan authorities are determined to address these systemic issues, which they argue undermine fair competition and labor rights.
For instance, in December, vacation rental giant Airbnb agreed to pay €576 million to settle a four-year tax dispute with Milan authorities. This case highlighted the lengths to which companies might go to minimize their tax burdens, often leading to extensive legal and regulatory challenges.
Previous Issues with Amazon in Milan
Amazon’s operations in Milan have faced scrutiny before. Earlier this year, Milan’s antitrust authority imposed a €10 million fine on two Amazon subsidiaries for their “Subscribe and Save” option. This service allowed customers to set up recurring deliveries of frequently purchased items, which the authorities argued infringed on consumers’ rights because of its automaticity. This fine highlighted ongoing concerns about Amazon’s business practices and their compliance with Milan consumer protection laws.
Implications
The seizure of €121 million from Amazon signifies a substantial step by Milan authorities to hold multinational corporations accountable for their business practices. The allegations of tax fraud and worker exploitation not only tarnish Amazon’s reputation but also highlight the broader challenges of regulating global companies that operate across multiple jurisdictions with varying laws and standards.
As the investigation continues, it remains to be seen what further actions the Milan authorities will take and how Amazon will respond to these serious allegations. This case serves as a reminder of the importance of robust regulatory frameworks and diligent enforcement to ensure that all companies, regardless of their size and influence, adhere to fair and legal business practices.
