Amazon and Apple targeted in new EU tax crackdown

Both Amazon and Apple were the subject of a fresh crackdown by the European Union on Wednesday over the amount of tax they pay on their European operations.

In the case of Amazon, the company has been ordered to pay €250 million in back taxes, following the decision of the European Commission that the technology giant had been given an unfair tax deal in Luxembourg.

Apple meanwhile was hit by the news that the Commission plans to take Ireland to the European Court of Justice (ECJ) for failing to recover 13 billion in back taxes from the US corporation.

European Competition Commissioner Margrethe Vestager said that under their agreement with Luxembourg, Apple had arranged to pay substantially less tax than other companies in Luxembourg, which is illegal under state aid rules. Under the 2003 agreement, Amazon was allowed to move a substantial part of its profits from Amazon EU to Amazon Holding Technologies, which was not subject to tax. In doing so, they ensured that almost three-quarters of the profits earned in Luxembourg were not taxed. Vestager commented “Member States cannot give selective tax benefits to multinational groups that are not available to others”.

The case is slightly embarrassing for the European Commission because its current president, Jean-Claude Juncker, was the prime minister of Luxembourg back when the deal was struck.

Amazon for its part denies receiving an special tax benefits from Luxembourg, with a spokesman commenting that the company was studying the ruling of the Commission and was evaluating the legal options available to it, including an appeal.

Meanwhile the decision to refer Ireland to the ECJ is the latest salvo in an ongoing dispute which has seen the European Commission arraigned on one side, with Apple and the Irish Republic on the other.

The European Commission argues that Apple’s tax arrangements in Ireland, where the company has its European headquarters, are illegal, in as much as the company pays tax at an effective rate of only 1% there. Apple contend that it is not an issue of what tax it pays, but where the tax is paid; as most of their products and services are “created, designed and engineered in the US, that is where they pay most of their tax.

Ireland, for its part, has always claimed that this is a matter of national sovereignty, and that the European Commission has misunderstood the relevant facts and Irish law”.

The Irish government have said that they are extremely disappointed with the Commission’s decision and intend to vigorously defend the case, although, in reality, it may be several years before the matter comes to court.

However, whatever the rights and wrongs of the individual cases, the message from the European Union is clear, with Ms. Verstager commenting “I hope that both decisions are seen as a message that companies must pay their fair share of taxes, as the huge majority of companies do.”

Leave a Reply