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

Amazon is under heavy scrutiny over suspected tax evasion and customs fraud in Italy, for what is being dubbed as “Trojan horse” actions by which the e-commerce giant imported Chinese goods into the country without paying taxes and duties, according to a Reuters report, citing three sources.

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

Two Amazon sites — a logistics hub in Cividate al Piano in Bermago province and its Italian headquarters in central Milan — were raided by officers from the Guardia di Finanza and the customs agency. Police have also identified the manager responsible for the movement of goods within Italy, the report added.

About 5,000 products were seized from the logistics hub including air fryers, mobile phone covers, pens, small scissors, and toys, while IT equipment was taken from the HQ, it added.

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

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

The report cited a court document, which accused Amazon of acting like a “Trojan horse” by bringing Chinese goods into Italy without paying sales taxes or customs duties, and costing the state hundreds of millions of euros. Given the scale of the allegations, other European Union nations might soon also begin investigations, the sources added.

Notably, the case is a new line of inquiry stemming from an investigation into an alleged 1.2 billion euro tax evasion case.

Milan prosecutors, working with the Monza branch of the Guardia di Finanza, suspect that goods are being imported from China into Europe and then moved into Italy through undisclosed channels to be distributed and sold via Amazon’s marketplace.

This constitutes smuggling and violates EU customs laws, prosecutors say.

Three sources said the number of products involved could reach half a million, with dozens of Italian companies, many believed to be fronts for Chinese entities, part of the scheme.

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

Will other EU nations also act?

According to one source, the investigation is expected to be extended to the rest of the 27-nation EU, Reuters reported.

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

Disputes over customs duties and sales taxes have fueled growing 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 euro tax evasion case, Milan prosecutors investigated three managers and Amazon's Luxembourg-based European unit over alleged tax fraud related to online sales in Italy between 2019 and 2021.

In relation to that case, Italy's tax agency has submitted a settlement proposal to Amazon on which the U.S. group must decide by December.

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

Under Italian law, platforms offering goods for sale are jointly liable for unpaid taxes by non-EU sellers.

Amazon has previously said it complies with all tax laws.

Separately, the European Public Prosecutor's Office has opened 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)