Amazon suspected of acting as 'Trojan horse' in Italy customs fraud case

By Emilio Parodi

MILAN (Reuters) -Italian police raided two Amazon sites on Monday as part of a growing investigation into alleged customs and tax fraud involving Chinese imports, three sources with direct knowledge of the case said.

Prosecutors suspect the e-commerce giant acted like a "Trojan horse", bringing Chinese goods into Italy without paying sales taxes or customs duties, according to a court document seen by Reuters.

The scheme could have cost the state hundreds of millions of euros and may extend across the European Union, sources said.

Dozens of officers from the Guardia di Finanza and the customs agency seized around 5,000 products at a logistics hub operated by the e-commerce giant in Cividate al Piano, in the northern province of Bergamo, the sources said.

At Amazon’s Italian headquarters in central Milan, police seized IT equipment and identified the manager responsible for the movement of goods within Italy.

Amazon declined to comment on the raids but said it was "committed to complying with all applicable tax laws and we cooperate fully with all relevant authorities".

NEW LINE OF INQUIRY STEMMING FROM PREVIOUS CASE

Among the products seized at the Bergamo centre were toys, mobile phone covers, air fryers, pens and small scissors.

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.

PROBE EXPECTED TO EXPAND TO OTHER EU NATIONS, SOURCES SAY

The investigation is expected to be extended to the rest of the 27-nation EU, a source said.

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.

EU PROSECUTORS ALSO INVESTIGATING AMAZON'S ACCOUNTS

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.

(Reporting by Emilio Parodi; editing by Crispian Balmer and Mark Heinrich)