Italian prosecutors are investigating Amazon and three of its executives over alleged tax evasion amounting to €1.2 billion, focusing on sales from non-EU sellers between 2019 and 2021.

The investigation stems from routine checks by tax police near Milan, who analysed 7 billion financial transactions carried out through Amazon's platform. They found that value-added tax (VAT) payments worth an estimated €1.2 billion had been evaded, with Chinese sellers accounting for about 70 to 80 per cent of all goods sold online in Italy during this period.

The total claim against the US-based tech giant could reach €3 billion when including interest and penalties. The case centres on Amazon's algorithm allegedly enabling non-EU sellers, primarily Chinese, to sell products in Italy without revealing their identity, thereby avoiding VAT payments.

Under Italian law, platforms acting as intermediaries for non-EU sellers are jointly responsible for any VAT non-payment. The investigation began in 2021 and also involves Amazon's Luxembourg-based European unit.

Amazon is yet to comment on the ongoing investigation but defended its tax compliance record. "Amazon is committed to complying with all applicable tax laws," the company said in an emailed statement to Reuters, noting it was among "Italy's top 50 tax contributors" with a tax bill exceeding $1.4 billion in 2023.

The dispute emerged during a transition period when the EU was reforming its process for taxing online sales. While new EU-wide rules took full effect in 2021, Italy had passed a national law in 2019 holding tech companies liable for tax evasion by third-party sellers on their platforms.

This is not Amazon's first brush with Italian tax authorities. In July 2024, tax police seized approximately €121 million from Amazon Italia Transport in a separate investigation into alleged tax fraud and illegal labour practices.

The case has broader implications for US-EU relations, as former US president Donald Trump has criticised the EU's VAT system and its treatment of American companies. At a recent meeting in Rome, numerous American companies complained to then US commerce secretary Gina Raimondo about Italian tax authorities' unpredictability and their targeting of large foreign businesses.

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