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22nd Jul 2018

Amazon becomes latest target in EU war on tax deals

  • The Danish EU commissioner has long rejected accusations of anti-US bias (Photo: European Commission)

The European Commission has ordered Luxembourg to claw back taxes from US retailer Amazon and dragged Ireland to court for failing to do the same from Apple.

It said Luxembourg should make Amazon pay back around €250 million.

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  • US retailer employs 1,500 people in Luxembourg offices (Photo: Nic Taylor)

The decision came after the Grand Duchy let Amazon transfer three quarters of its European profits to a shell firm outside the EU to dodge the tax authorities.

The Commission already ordered Ireland last year to recover €13 billion from US tech giant Apple in a similar case.

It referred Ireland to the EU Court of Justice on Wednesday (4 October) because, it said, Dublin had done nothing to get the money back.

The decisions were meant to send the message that the Commission would not tolerate state aid for multinationals via sweetheart tax deals.

Tax perks have helped some EU capitals to become financial services centres, with Amazon alone employing 1,500 people in Luxembourg.

But the Commission said this practice harmed native EU firms, who became less competitive because they had to shoulder a greater tax burden

"This is for all companies to see that paying your taxes is part of doing business in Europe," EU competition commissioner Margrethe Vestager said.

"It's reasonable for all companies to see that profits are taxed where they are earned," she said.

She said "Ireland has not yet recovered any money, not even in part".

She rejected the notion that she was targeting American companies, amid separate EU cases against Apple and other US tech giants on anti-trust issues.

"I can find no bias. This is about competition in Europe, no matter what your country's flag is and no matter your ownership," she said.

She also rejected comparisons between Ireland and EU rebellions further afield.

Hungary and Poland, among others, have refused to implement EU decisions on sharing asylum seekers.

But Vestager said the Irish EU court case was part of due process.

She said EU back-tax decisions on US coffee chain Starbucks and Italian car firm Fiat were being handled in an orderly manner.

She also said Luxembourg and Cyprus, another EU financial centre, had changed their laws to put an end to unfair tax deals in future.

Luxleaks

The Commission crackdown comes after Luxleaks - the revelations, three years ago, that the Grand Duchy had let hundreds of multinational firms off the hook in order to secure their business.

That, in turn, exposed the fact that several EU states had similar regimes in place.

"We may still, in future, open other cases, but that has not been decided yet," Vestager said, amid ongoing probes into other cases in Luxembourg, Belgium, and the Netherlands.

She noted that the Commission had proposed a new law to make EU countries' tax rulings more transparent.

The proposal on so called country-by-country reporting came out last year, but EU states are still in talks on whether it should be decided by unanimity or by a vote.

"Our work is by no means done" Vestager said.

Kickback from Luxembourg and Ireland

Luxembourg and Dublin immediately challenged Brussels on Wednesday.

"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," the Grand Duchy said.

An Irish statement said its referral to the EU court was "extremely regrettable".

It rejected Vestager's accusation that it did nothing over the past 12 months, saying it was "close to the establishment of an escrow fund", where it intended to park Apple's billions pending the outcome of its EU dispute.

"Ireland fully respects the rule of law in the European Union," it said.

Amazon added in its reaction that "we paid tax in full accordance with both Luxembourg and international tax law".

EU bill

Transparency International, a NGO in Brussels, said the country-by-country law would be a better way to stamp out abuse than the current approach of tackling individual cases on state aid grounds.

The NGO's Elena Gaita told EUobserver that would create a "level playing field".

She said the state aid approach left Vestager open to attacks that she was targeting US firms.

She also said that if the country-by-country bill was decided by unanimity, then either Cyprus, Luxembourg, Ireland, or Malta - also an EU financial centre - were likely to block it.

Vetsager's boss, Commission head Jean-Claude Juncker, was prime minister of Luxembourg when many of the tax schemes were put in place.

But she said on Wednesday that her probe was designed to establish guilt in "the behaviour of member states" not of "different persons in the positions that they hold".

EU takes time to ponder tech giant tax

The EU commission published a paper that outlined several options on how to increase tax income from internet companies' activities, but fell short of proposing legislation.

EU takes aim at UK tax perks

Commission to probe whether UK tax perks for multinationals worth billions of euros amounted to illegal state aid.

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