Amazon has paid little tax in Australia since setting up its local online retail business, its financial accounts show, with possibly hundreds of millions of dollars flowing offshore last year.

Key points: Amazon Australia has three local entities that combined paid $20 million tax on more than $1 billion in revenue last year

Amazon Australia has three local entities that combined paid $20 million tax on more than $1 billion in revenue last year Amazon is among other tech giants including Facebook and Google that use loopholes to legally reduce tax bills

Amazon is among other tech giants including Facebook and Google that use loopholes to legally reduce tax bills The OECD is devising a plan to collect more tax from multinationals, but it could take years to implement

The company has used a range of tactics and loopholes to legally reduce the income taxes it pays around the world.

ABC News can reveal that, in Australia, Amazon's three local entities had combined revenues of more than $1 billion but a combined tax bill of just over $20 million in 2018.

While corporate tax is based on profits, not revenue, governments globally are currently trying to crack down on tech giants shifting income offshore.

The Seattle-based company headed by the world's second richest man, Jeff Bezos, basically treats Australia as a marketing operation across some of its entities.

According to the Bloomberg Billionaires List, Mr Bezos's personal wealth is about $109 billion. Until earlier this week, he was the world's richest man, but Microsoft's Bill Gates has now taken back the top spot.

According to the Bloomberg Billionaires List, Amazon's founder Jeff Bezos has a personal wealth of about $110 billion. ( Reuters: Mike Segar )

The business Mr Bezos founded opts to use a tax structure similar to those adopted by other technology companies — including Google, Facebook, Uber and Airbnb — whereby hundreds of millions of dollars of "revenue" is counted offshore.

This strategy of shifting almost all of its income outside the US to reduce its tax bills has seen the company face intense scrutiny in recent years from regulators in the United States and Europe.

Last year, Amazon, which is now valued at about $US869 billion, paid zero US federal income tax on record profits of more than $US11 billion.

A large proportion of Amazon's global profits end up in a Luxembourg subsidiary, which is why Amazon has in recent years drawn the attention of the US Internal Revenue Service (IRS) and the European Commission.

The IRS recently lost its case against Amazon in the US courts, which had related to a $1.5 billion dispute over the company's tax treatment of transactions with a Luxembourg subsidiary.

The European Commission in 2017, declared Amazon's use of a Luxembourg subsidiary as "illegal" state aid and ordered it to backpay 250 million euros in taxes — a finding the company rejected and has appealed.

Amazon says it operates within the law, others call it a 'farce'

Amazon Australia files limited financial information, as it is not a publicly listed company on the ASX.

It does not state in its 2018 accounts which related entities the 'revenue' comes in from, and may flow back out to, and it did not respond to questions from ABC News asking where these were located.

However, its previous 2016 accounts had shown related-party deals with the once-notorious tax haven, Luxembourg.

Amazon also did not respond to questions about whether the company was facing a review or audit by the Australian Taxation Office (ATO).

"We pay all applicable taxes in Australia and every country where we operate," an Amazon spokesman said.

"Corporation tax is based on profits, not revenues, and our profits have remained low given our heavy investment and the fact that retail is a highly competitive, low-margin business."

Principal analyst at the Centre for International Corporate Tax Accountability and Research (CICTAR) Jason Ward said Amazon's tax structure was a "complete farce" and called on the Federal Government to require greater transparency from companies.

"How is it possible that Amazon's largest Australian entity, in the top 1,000 companies by total income in Australia, can earn all of its income from fees charged to related parties?" he asked rhetorically.

While not shown in Amazon's accounts, Mr Ward believes that fees charged in low-tax jurisdictions— perhaps Luxembourg — enabled Amazon to shift revenue to where it is taxed very little or not at all.

"How can responsible Australian companies — who pay taxes as they should — compete fairly with Amazon?" Mr Ward argued.

"It's important that companies like Amazon … controlled by the world's richest man, aren't allowed to continue to use loopholes in the global system to basically rob our schools, hospitals, and other public services from the funding that they need."

How Amazon structures its online business to pay little tax

Amazon's local operations are structured under three main banners: Amazon Commercial Services, Amazon Web Services and Amazon Corporate Services.

All three businesses are ultimately owned by Amazon.com Inc, a company based in Seattle, Washington, but incorporated in low-tax Delaware.

The bulk of revenue that flows into these Amazon companies in Australia is actually sourced from related parties offshore.

While the e-commerce giant has long sold Kindle books and other intangibles through its Australian website, Amazon's consumer-facing online business officially opened in Australia in late 2017, allowing physical goods purchased on Amazon.com.au to be shipped from its local warehouses.

Aisles filled with stock inside Amazon Australia's Melbourne fulfillment centre. ( Supplied: Amazon )

This business, Amazon Commercial Services, is estimated by research firm IBISWorld to hold only about 2 to 3 per cent of the Australian online shopping market.

It employs about 195 people locally and earned $292.3 million in revenue for the year ending December 2018 (its first full year of operation) but reported a loss of $4.4 million. More than 50 per cent of its revenue came from related parties.

'Receipts from customers' amounted to $155.6 million, while 'payments to suppliers' totalled $250.2 million.

The company recorded $158.6 million in 'general and administrative expenses'.

While the company reported a loss, it made a provision for income tax payments of under $1 million.

Heather Rutherford, a regular shopper on Amazon.com.au and small business owner, said she had assumed money spent in Australia was fully taxed locally

"If I'm buying most of my consumer goods and sending my money overseas, then I'm shooting myself in the foot," she said.

Amazon Australia customer Heather Rutherford. ( ABC News )

The big money generator: cloud computing

But it's not the online retail business that is the big money generator.

IBISWorld senior industry analyst Liam Harrison said Amazon made more money from its cloud-computing services than from its online retail business in Australia.

"Data-storage services are essentially the backbone of the internet; with no data-storage services you essentially don't have the internet," Mr Harrison said.

"Without Amazon Web Services, you would lose potentially as much as half the internet."

But again, Amazon's accounts indicate most of the revenue from its local arm selling data storage to business and government may actually flow overseas.

How much of that revenue returns to Australia and how much is retained offshore is impossible to ascertain from the published accounts.

Amazon declined to say which Amazon companies, and in which country, this revenue is flowing to.

Amazon Web Services employs more than 1,000 people locally.

The "revenue" of Amazon Web Services represents fees received for support services provided to "external third parties and to related companies", including "marketing, training and professional services", its accounts noted.

Its financial accounts show it earned $306 million in "revenue" in 2018 (compared with $189 million in 2017), which is growth of 61.7 per cent.

Of that $306 million in revenue, about $291 million, or about 95 per cent, came from related parties.

The entity paid $327.2 million in "general and administrative expenses". Again it is not clear where this money flowed to.

Amazon Web Services' final income tax paid was $10.3 million (up from $6.98 million in 2017).

Amazon took on IBM in the data-storage game

The third and biggest entity in terms of related-party revenue is Amazon Corporate Services.

It employs about 400 people locally and, according to a report by IBISWorld, it holds about 19 per cent of Australia's data-storage market, with the other main players being Equinix Australia, IBM and NextDC.

Amazon Corporate Services brought in $490 million of revenue in 2018 (up from $375 million in 2017) and this was exclusively from related parties.

"It generates $490 million in revenue from other Amazon companies essentially, so it makes it easy for Amazon to be shifting profits offshore," Mr Ward said.

Amazon Corporate Services paid out $466.8 million in "general and administrative expenses".

Its final income tax paid was $10.3 million in 2018 (up from $7.5 million in 2017). This income tax paid was less than $10.7 million in interest paid on loans.

While disclosure of related-party transactions is limited in the 2018 Australia filing, the financial statements of a Luxembourg company, Amazon Europe Core Sarl, show loans to Australia of $91 million in 2017 and $157 million in 2016.

These loans, with more than $4.8 million in interest payments, have been repaid but may have been replaced with other arrangements that shift profits to Luxembourg.

A global minimum tax or more fights?

Despite the Federal Government giving the ATO more powers to hunt multinationals, taxing digital giants is a tricky game.

Mr Harrison said Amazon's structure was complicated because many of Amazon's goods were intangible and it was difficult to know how to tax it.

"If you're buying or selling data-storage services, who is ultimately responsible for providing those data-storage services?" Mr Harrison asked.

"It isn't clear cut and so, then, the ultimate parent company can decide."

A number of European countries such as France have already moved to tax digital giants on their revenue rather than profits.

Australia had toyed with the idea of a tax on digital companies' revenue, but then decided to wait for the OECD to hand down a global solution.

The OECD plan, expected to be handed down early next year, could introduce new measures such as a global minimum tax that applies to all multinationals.

Amazon told ABC News it welcomed the publication of proposals by the OECD, as a global agreement would "limit the risk of double taxation and distortive unilateral measures".

While big changes to the global tax system are coming, Mr Ward said there would be a fight between countries over how to fairly distribute the revenue.

Editor's note: This story has been edited to clarify that the financial statements of Amazon's Australian-based companies do not show that revenue is shifted from those companies to avoid tax.