EU orders Amazon to pay 250 million euros in back tax
October 4, 2017
In Brussels' latest regulatory move targeting US tech companies accused of tax avoidance, the European Commission has ordered Luxembourg to collect 250 million euros in back taxes from American retail giant Amazon.
The Commission found on Wednesday that Luxembourg had granted illegal tax benefits from 2003 to the American online retail giant.
It ruled that Amazon had been paying a tax-deductible royalty to another legal entity (Amazon Europe Holding Technologies) that was not subject to corporate taxation in Luxembourg and most of its European profits were therefore recorded in Luxembourg, but not taxed there.
The 250 million euros ($294 million) is less than an estimate of 400 million euros, which sources told the news agency Reuters that European Commissioner for Competition Margrethe Vestager had calculated in 2016. However, the EU executive said following the ruling that the exact amount of back payment is still to be calculated by Luxembourg authorities.
"As a result, almost three-quarters of Amazon's profits were not taxed," said Vestager.
Europe's Digital Economy - Trailing Behind
The European Commission launched its investigation into Amazon's subsidiary in Luxembourg, Amazon EU, in 2014.
Ireland was taken to court for failing to collect 13 billion euros in taxes from Apple, arguing that – as in Amazon's case – it had profited from a system allowing it to escape most of its taxes the EU felt were nonetheless due.
The European Union is actively looking to close loopholes for US multinationals and is considering harmonized tax rules.
Taxation is a national competence in the 28-country bloc, but the European Commission holds the view that the sweetheart tax deals struck by Apple and others with countries such as Ireland, the Netherlands and Luxembourg constitute illegal state aid, an area which it regulates.