EU Commission deals €250m tax blow to Amazon

Written by Martin Banks and Julie Levy-Abegnoli on 4 October 2017 in News
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The European Commission has ordered Luxembourg to recover €250m’s worth of illegal tax benefits from Amazon.

Amazon | Photo credit: Press Association


The Commission announced on Wednesday that tax breaks granted by Luxembourg to Amazon were illegal under EU state aid rules because it allowed Amazon to pay substantially less tax than other businesses.

At the same time, the Commission said that it will take Ireland to the European Court of Justice to recover €13bn in illegal tax subsidies plus interest from Apple.

Following an in-depth investigation launched in October 2014, the Commission concluded that a tax ruling issued by Luxembourg in 2003, and prolonged in 2011, lowered the tax paid by Amazon in the Benelux country without any valid justification.


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The tax ruling enabled Amazon to shift the vast majority of its profits from an Amazon group company that is subject to tax in Luxembourg (Amazon EU) to a company which is not subject to tax (Amazon Europe Holding Technologies).

In particular, the tax ruling endorsed the payment of a royalty from Amazon EU to Amazon Europe Holding Technologies, which significantly reduced Amazon EU’s taxable profits. The Commission said its investigation showed that the level of the royalty payments, endorsed by the tax ruling, was inflated and did not reflect economic reality.

The executive concluded that the tax ruling granted a selective economic advantage to Amazon by allowing the group to pay less tax than other companies subject to the same national tax rules.

Speaking in Brussels on Wednesday, European competition Commissioner Margrethe Vestager said, “Luxembourg gave illegal tax benefits to Amazon. 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.”

She added, “This is illegal under EU State aid rules member states cannot give selective tax benefits to multinational groups that are not available to others.”

S&D group members Udo Bullman and Pervenche Berès praised the decision, saying, “Again, Commissioner Vestager has shown great determination and resolve in her handling of state-aid cases involving big multinationals. We support her efforts to stand up to those companies who think they are above EU rules. The new state-aid case involving Amazon reveals yet more proof of the need to move forward towards a genuine common corporate taxation in Europe.  We also think that Ireland must respect the Commission’s historic decision on Apple a year ago.”

The ALDE group’s Petr Ježek said, “Any company doing business in EU should play by our rules and respect the principle of tax fairness and transparency.”

Sven Giegold, the Greens/EFA group spokesperson for economic and financial affairs, said, “The Commission’s decision is a success for tax justice. Illegal tax tricks by large corporations require a tough response from the rule of law.

“Massive tax avoidance by Amazon and other companies is a major threat to justice. It is welcome that the Commission is on the side of honest taxpayers rather than unfair tax evaders. No corporation, no matter how large, is above the law. Only if politicians are tough on tax avoidance, confidence in democracy can be secured. However, the recovery of €250m is low compared to Amazon’s level of tax dumping. Competition law cannot replace a truly European tax policy.”

 

About the author

Martin Banks is a senior reporter for the Parliament Magazine

Julie Levy-Abegnoli is a journalist for the Parliament Magazine

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