Amazon faces scrutiny over ‘Trojan horse’ actions in Italy amid smuggling, customs law violations, tax fraud allegations

Amazon is under intense scrutiny in Italy for suspected tax evasion and customs fraud, according to a Reuters report citing three sources, in which the e-commerce giant imports Chinese goods into the country without paying taxes and duties, actions called “Trojan horses”.

According to the report, Italian police raided two Amazon sites in the country on November 24 as part of a growing investigation into the issue.

Two Amazon sites, a logistics center in Cividate al Piano in the province of Bermago and the Italian headquarters in central Milan, were raided by officers from the Guardia di Finanza and the customs office. The police also identified the manager responsible for transporting goods in Italy, the report said.

It was stated that approximately 5,000 products were seized from the logistics center, including air fryers, mobile phone cases, pens, small scissors and toys, and IT equipment was seized from the center.

Amazon declined to comment on Reuters queries but said it was “committed to complying with all applicable tax laws and is fully cooperating with all relevant authorities.”

Amazon acted as a ‘Trojan horse’: What does this mean?

The report cited a court document accusing Amazon of acting as a “Trojan horse” by bringing Chinese goods into Italy without paying sales tax or customs duty, costing the state hundreds of millions of euros. Sources stated that, given the size of the allegations, other European Union countries may soon begin investigations.

It is noteworthy that the case is a new line of investigation arising from an investigation into alleged tax evasion of 1.2 billion euros.

Milan prosecutors, working with the Monza branch of the Guardia di Finanza, suspect that the goods were imported from China to Europe and then transported to Italy through undisclosed channels to be distributed and sold through the Amazon marketplace.

Prosecutors say this constitutes smuggling and violates EU customs laws.

The number of products involved could reach half a million and dozens of Italian companies are believed to be fronts for Chinese entities as part of the scheme, three sources said.

It was not immediately clear what impact the raids would have on Amazon operations in Italy.

Will other EU countries also take action?

According to a source reported by Reuters, the investigation is expected to be expanded to include the rest of the EU, which consists of 27 countries.

Milan prosecutors were summoned to the headquarters of the EU’s criminal justice cooperation agency, Eurojust, in The Hague in July, where they presented their investigation to counterparts from several EU countries, including Germany, France, the Netherlands, Poland, Spain, Belgium, Sweden and Ireland.

Disagreements over tariffs and sales taxes have fueled rising tensions with the United States over the past year, but it is unclear how this case involving China will be viewed in Washington and Brussels.

In the original €1.2 billion tax evasion case, Milan prosecutors investigated three executives and Amazon’s Luxembourg-based European unit for alleged tax fraud related to online sales in Italy between 2019 and 2021.

Regarding this case, Italy’s tax authority has presented Amazon with a settlement offer, which the US group must decide by December.

Prosecutors believe Amazon’s algorithm allows goods from non-EU sellers, mostly Chinese, to be sold in Italy without specifying the supplier, helping to avoid VAT.

Under Italian law, platforms offering products for sale are jointly liable for taxes not paid by sellers outside the EU.

Amazon has previously said it complies with all tax laws.

Separately, the European Public Prosecutor’s Office has launched its own investigation into Amazon’s accounts from 2021 to 2024 after new EU rules imposed stricter sales tax obligations on marketplaces.

(With inputs from Reuters)