Amazon ordered to repay €250m by EU over ‘illegal tax advantages’

Amazon has been ordered to repay €250m (£222m) by EU authorities, after a ruling that the technology company benefited from illegal and unfair state aid from Luxembourg.

The European commission also announced on Wednesday that it planned to take the the Irish government to the European court of justice (ECJ) over its failure to collect €13bn in unpaid taxes from Apple, in relation to an earlier ruling.

Margrethe Vestager, the EU commissioner in charge of competition, said Luxembourg’s “illegal tax advantages to Amazon” had allowed almost three-quarters of the company’s profits to go untaxed, allowing it to pay four times less tax than local rivals.

“This is an illegal practice under EU state aid rules,” Vestager said. “Member states may not grant selective tax concessions to multinational groups to which other companies do not have access.”

The commission said Amazon had benefited from an illegal tax deal granted by the Luxembourg authorities that allowed the company to artificially reduce its tax bill by €250m from 2006 to 2014. The company has been ordered to repay the full amount plus interest.

Amazon rejected the findings of the commission investigation. “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. We will study the commission’s ruling and consider our legal options, including an appeal.”

The government of Luxembourg said: “As Amazon has been taxed in accordance with the tax rules applicable at the relevant time, Luxembourg considers that the company has not been granted incompatible state aid.”

In a separate announcement, Vestager said she was appealing to Europe’s highest court to enforce an earlier ruling against Apple to ensure the iPhone maker repaid €13bn in back taxes.

The latest decision comes after Brussels demanded a record €13bn in unpaid back taxes from Apple, following an investigation into a sweetheart deal granted by the Irish government.

Apple, which has appealed to Europe’s highest court to contest the decision, has not repaid the money to the Irish government. Ireland, which supports Apple’s appeal, has not demanded repayment.

In the latest twist Vestager said on Wednesday she would appeal to the ECJ to order Dublin to collect the money.

The Irish government described the decision as “extremely regrettable” in a statement.

“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.”

The commission’s case against Amazon centres on two subsidiaries incorporated in Luxembourg and controlled by the US parent – Amazon EU group and Amazon Europe Holding Technologies. The latter was described by the commission as “an empty shell” that had no employees or offices, but was used to bring down the company’s tax bill.

The Guardian, which in 2014 revealed Luxembourg’s role in orchestrating tax avoidance deals for hundreds of global companies, has reported that Amazon could be obliged to pay $1.5bn alone to US tax authorities, who concluded that Amazon’s Project Goldcrest had no benefits “other than avoided US corporate income taxes”.

The case raises awkward questions for Jean-Claude Juncker, the European commission president, who served as Luxembourg’s prime minister from 1995 to 2013, also acting as finance minister for much of that period.

The commission launched the Amazon investigation in October 2014, just weeks after Juncker took office, in order to determine whether Luxembourg’s tax treatment had been so generous that it amounted to illegal state aid.

Many European politicians and business groups argue that the generous tax breaks give Amazon an unfair competitive advantage over smaller rivals, prompting the recent announcement of a plan to rewrite EU tax rules for digital tax companies. But investigations into unfair state aid run broader, with the EU authorities expected to conclude an inquiry into the fast-food chain McDonald’s in the coming weeks.

The commission has also ruled unlawful tax deals between Starbucks and the Dutch authorities, as well as Fiat’s arrangements with Luxembourg. The Apple case has generated the biggest furore, with the chief executive, Tim Cook, dismissing the claims as “total political crap”.

The commission said the sweetheart deal with the Irish government allowed Apple to pay a maximum tax rate of 1%, which fell to just 0.005% in 2014. The usual rate of corporation tax in Ireland is 12.5%.

Setting out her decision to refer the Apple case to the ECJ, Vestager said: “Ireland must recover up to €13bn of illegal aid from Apple. However, more than a year after the adoption of this decision by the commission, Ireland has still not recovered the sum, [not even] in part.”

comments powered by Disqus