Commission orders Amazon to pay €250 million in back taxes

The European Commission ordered Amazon to pay €250 million in back taxes to Luxembourg. [(soumit/Flickr)]

The European Commission ordered Luxembourg on Wednesday (4 October) to recover unpaid taxes worth around €250 million from the online sales giant Amazon, saying the country had granted Amazon’s European arm “undue tax benefit” by allowing it to shift profits to a tax-exempt shell company.

Following an in-depth investigation launched in October 2014, the Commission has concluded that “Luxembourg gave illegal tax benefits to Amazon”, it said in a statement.

Luxembourg’s tax rulings in 2003 and 2011 enabled Amazon to shift the vast majority of its profits from an Amazon group company subject to tax in Luxembourg (Amazon EU) to a company which is not subject to tax (Amazon Europe Holding Technologies).

“As a result, almost three-quarters of Amazon’s profits were not taxed. In other words, Amazon was allowed to pay four times less tax than other local companies subject to the same national tax rules. This is illegal under EU State aid rules,” Competition Commissioner Margrethe Vestager said.

Addressing a news conference in Brussels, she said the shell company had “no employees, no offices, no obvious business activities” and stressed:

“Illegal aid must be recovered as soon as possible, otherwise the company continues to benefit from illegal advantages”.

Amazon rejected the Commission’s claim and said it had done nothing wrong.

“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,” the company said in a statement.

“We will study the Commission’s ruling and consider our legal options, including an appeal. Our 50,000 employees across Europe remain heads-down focused on serving our customers and the hundreds of thousands of small businesses who work with us.”

Eurodad, the European Network for Debt and Development, welcomed the Commission’s move but called for action to fix the system.

“Whilst we welcome the Commission’s action, it makes no sense to tackle these cases one by one – we need to fix the tax system so that all corporations pay their fair share of taxes in the first place. It’s also time to let citizens see how much multinational corporations actually pay in taxes in their countries,” said Tove Maria Ryding, Tax Coordinator at Eurodad.

Commission slaps record €2.4 bln anti-trust fine on Google

The European Commission fined Google a record-high €2.42 billion on Tuesday (27 June) for breaching EU antitrust rules by using its dominant market position to promote its own comparison shopping service at the expense of rivals.

Apple dragged to court

The same day, the Commission also decided to refer Ireland to the European Court of Justice for failing to recover from Apple illegal state aid worth up to €13 billion, as required by a previous Commission decision from August 2016, which Ireland has appealed.

“However, more than one year after the Commission adopted this decision, Ireland has still not recovered the money… That is why we have today decided to refer Ireland to the EU Court,” Commissioner Vestager said.

Reacting to the news, the Irish government said in a statement it was “extremely disappointing that the Commission has taken action at this time against Ireland”.

“Irish officials and experts have been engaged in intensive work to ensure that the state complies with all its recovery obligations as soon as possible, and have been in constant contact with the European Commission and Apple on all aspects of this process for over a year.”

“It is extremely regrettable that the Commission has taken this action, especially in relation to a case with such a large scale recovery amount. Ireland has made significant progress on this complex issue and is close to the establishment of an escrow fund, in compliance with all relevant Irish constitutional and European Union law.”

Commission’s Apple tax clawback violates Irish sovereignty, claims Dublin

The European Commission today (30 August) hit Apple with a €13 billion clawback of unpaid taxes in Ireland, but Dublin branded the move a violation of its sovereignty and both the country and the US tech giant immediately said they would appeal the decision.