Amazon Under Scrutiny in Italy for Alleged Chinese Goods Smuggling, Tax & Customs Fraud Probe Expands Across EU

Amazon Under Fire: Italian Authorities Probe Alleged Chinese Goods Smuggling & Tax Evasion

Italian authorities have significantly escalated an investigation into the online retail giant, Amazon. The e-commerce behemoth is suspected of orchestrating a large-scale operation to import Chinese merchandise into Italy, allegedly bypassing crucial sales taxes and customs duties.

On November 24, a coordinated effort saw raids conducted at two key Amazon locations: its Italian headquarters situated in central Milan, and a major logistics hub in Cividate al Piano, within the northern province of Bergamo. These actions form part of a broadening inquiry into alleged customs and tax fraud linked to Chinese imports.

"Trojan Horse" Allegations and Potential EU-Wide Impact

Prosecutors involved in the case characterize Amazon's alleged role as a "Trojan horse." They claim the company enabled the surreptitious entry of innumerable Chinese products into Italy, thereby circumventing essential fiscal obligations. Sources with direct knowledge of the investigation estimate that this illicit scheme could have deprived the Italian state of hundreds of millions of euros. Furthermore, there is a strong belief that the ramifications and scope of this operation could extend across the entire 27-nation European Union.

Raids Uncover Thousands of Products, IT Equipment Seized

During the recent raids, officers from Italy's Guardia di Finanza (financial police) and the customs agency seized approximately 5,000 products. These items, ranging from toys and mobile phone covers to air fryers, pens, and small scissors, were confiscated from the logistics center in Bergamo. Concurrently, at Amazon's Milan headquarters, police confiscated vital IT equipment and identified a manager specifically responsible for the movement of goods within Italy.

In response to the developments, Amazon has refrained from commenting directly on the raids. However, the company issued a statement asserting its "commitment to complying with all applicable tax laws" and its pledge to "cooperate fully with all relevant authorities."

Deepening Probe into Undisclosed Channels and Joint Liability

This new investigative thread emerges from an existing, larger probe into an alleged €1.2 billion (S$1.8 billion) tax evasion case. Milan prosecutors, working in conjunction with the Monza branch of the Guardia di Finanza, suspect a systematic method: goods are imported from China into Europe, then rerouted into Italy via undisclosed channels for subsequent distribution and sale through Amazon's marketplace. Such practices, according to prosecutors, constitute smuggling and directly contravene EU customs laws.

Sources indicate the sheer volume of products involved in this alleged scheme could reach up to half a million. The investigation also points to the complicity of dozens of Italian companies, many of which are believed to be shell entities or fronts for Chinese businesses. The immediate impact of these raids on Amazon's daily operations in Italy remains uncertain.

International Reach and Broader Trade Tensions

The investigation's reach is anticipated to broaden across the entire EU. In July, Milan prosecutors presented their initial findings at The Hague headquarters of Eurojust, the EU agency for criminal justice cooperation. This engagement involved discussions with judicial counterparts from numerous EU member states, including Germany, France, the Netherlands, Poland, Spain, Belgium, Sweden, and Ireland, underscoring the potential international scope of the alleged illicit activities.

The ongoing case also surfaces amidst growing international trade tensions. While disputes over customs duties and sales taxes have previously strained relations between the United States and the European Union, how this specific China-involved case will be perceived and addressed by authorities in Washington and Brussels is an evolving situation.

Amazon's Algorithm, VAT Avoidance, and EPPO Involvement

Separately, Amazon’s Luxembourg-based European unit and three of its managers are under investigation in the original €1.2 billion tax evasion case, which focuses on alleged tax fraud related to online sales in Italy between 2019 and 2021. Italy's tax agency has presented a settlement proposal to Amazon, requiring a decision by December.

A key contention by prosecutors is that Amazon’s advanced algorithm inadvertently or deliberately enables non-EU sellers, predominantly from China, to sell goods in Italy without proper supplier identification, thus facilitating VAT avoidance. Italian law stipulates that platforms that offer goods for sale can be held jointly liable for unpaid taxes by non-EU sellers. Amazon has consistently maintained that it adheres to all tax regulations.

Adding another layer to the scrutiny, the European Public Prosecutor’s Office (EPPO) has initiated its own investigation into Amazon’s accounts covering the period from 2021 to 2024. This action follows the implementation of new EU regulations that impose stricter sales tax obligations on online marketplaces.