EU orders Amazon to pay 250 mn euros in taxes to Luxembourg
Luxembourg and internet shopping giant Amazon are accused of an illegal deal to pay less tax than other businesses.business Updated: Oct 10, 2017 14:20 IST
The EU turned the screw on US tech giants Wednesday, ordering Amazon to repay Luxembourg 250 million euros in back taxes and referring Ireland to the top EU court for failing to collect billions from Apple.
Europe’s competition chief Margrethe Vestager accused tiny Luxembourg of an illegal deal with internet shopping giant Amazon to pay less tax than other businesses.
The two cases are part of a wider offensive by the EU on Silicon Valley behemoths as Europe seeks ways to regulate them more tightly on issues ranging from privacy to taxation.
“Luxembourg gave illegal tax benefits to Amazon. As a result, almost three quarters of Amazon’s profits were not taxed,” Vestager said in a statement.
The tax demand comes a year after the hard-charging Vestager ordered tech icon Apple to repay 13 billion euros ($14.5 billion) in back-taxes to Ireland in a decision that shocked the world.
In a sign that it was not letting up, the EU on Wednesday referred Ireland to the EU’s highest court for failing to collect the bill.
“The European Commission has decided to refer Ireland to the European Court of Justice for failing to recover from Apple illegal state aid,” the EU’s anti-trust regulator said in a statement.
“Luxembourg gave illegal tax benefits to Amazon. As a result, almost three quarters of Amazon’s profits were not taxed,” -Margrethe Vestager, Europe’s competition chief.
For its part, Amazon rejected the charges and said it would “study the commission’s ruling and consider our legal options”.
“We believe that Amazon did not receive any special treatment from Luxembourg and that we paid tax in full accordance with both Luxembourg and international tax law,” it said in a statement.
Vestager’s announcement comes days after the EU said at a special digital summit that it was drawing up a special tax targeting Google and Facebook, a policy championed by French President Emmanuel Macron.
Silicon Valley targeted
Launched three years ago, the European Commission’s probe into Amazon’s deals with Luxembourg was part of several investigations into sweetheart tax arrangements between major companies and several EU countries.
The commission -- the EU’s powerful executive arm responsible for policing its competition rules -- opened the probe in 2014 in the belief that Luxembourg’s tax favours to Amazon constituted “state aid” that distorts competition.
Many came in the wake of the “Luxleaks” scandal which revealed details of tax breaks given by the tiny but wealthy duchy of Luxembourg to dozens of major US firms.
Embarassment for Juncker
The revelations came as a particular embarrassment for European Commission President Jean-Claude Juncker, who was prime minister of Luxembourg at the time when the tax deals were made.
In similar cases, Vestager decided against the tax deals for coffee-shop chain Starbucks by the Netherlands and Italian automaker Fiat by Luxembourg -- both companies were ordered to pay roughly 30 million euros.
The Amazon case hinges on the belief that a tax deal between Luxembourg and Amazon in 2003 constituted illegal state aid, giving the company an unfair advantage over competitors.
Once found at fault, a country must recover the amount granted in illegal state aid, potentially a huge amount of money given that some of the tax deals date back many years.
Amazon has sharply rejected the allegations, arguing that it employs 1,500 people in Luxembourg and that its business remains unprofitable in Europe.
Vestager’s biggest decision was by far against Apple in Ireland, which shocked Washington. The iPhone maker, as well as Ireland, have appealed the decision.