'Unfair' tax practices linked to Virgin's woes

France’s culture minister has accused Amazon and other online retailers of “unfair competition” by using foreign bases to avoid French taxes.

Aurélie Filippetti was commenting on the threat of closure faced by Virgin Megastore France, the latest casualty of an industry-wide slump in CD and DVD sales, which is expected to declare itself insolvent this week.

Ms Filippetti said music retailers were suffering due to a “a real revolution and unfair competition which means that – it must be said – certain large companies such as Amazon . . . do not face the same taxes as those which are physically based in France”.

It emerged last November that France has made a $252 million tax claim against Amazon as part of a crackdown on multinationals that channel profits through low-tax countries. Amazon said the French authorities had made the claim for back taxes, interest and penalties in relation to “the allocation of income between foreign jurisdictions” between 2006 and 2010.

It intends to fight the claim.

France’s tax office is also investigating the relationship between Google’s French subsidiary and its European headquarters in Dublin.

Ms Filippetti’s comments came amid growing concern over more than 1,000 jobs at Virgin Megastore France, which operates 25 shops in France, including a flagship operation on the Champs-Élysées. The group, which has annual sales of nearly €300 million, has been loss-making for the past four years.

It has blamed its problems on rental costs in high-profile city-centre locations, falling CD and DVD sales and a recent drop in book sales.