The European Union intensified its crusade against U.S. tech giants today by demanding that Amazon pay $294 million in taxes to Luxembourg and taking Ireland to court over its failure to collect $15 billion in taxes from Apple.
In a ruling issued today, the European Union said it found that Luxembourg had violated State Aid Rules by giving “undue tax benefits” to Amazon. EU rules forbid members states from giving special tax treatment to individual companies, arguing that it harms competition among member states.
Three years ago, the EU began its investigation of a tax ruling originally made by Luxembourg in 2003. This ruling allowed Amazon to avoid $294 million in taxes, which the EU says the company must now pay.
“Luxembourg gave illegal tax benefits to Amazon,” said Margrethe Vestager, the EU commissioner in charge of competition policy, in a statement. “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. This is illegal under EU State aid rules. Member States cannot give selective tax benefits to multinational groups that are not available to others.”
The EU investigation found that Luxembourg’s tax ruling allowed “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 a statement emailed to reporters by an Amazon spokesperson, the company denied any wrongdoing:
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. Our 50,000 employees across Europe remain heads-down focused on serving our customers and the hundreds of thousands of small businesses who work with us.
The Amazon tax scheme echoes that of another U.S. tech giant, Apple, which is facing a far greater tax payment of $15 billion after the EU found last year that it had used an Irish tax ruling to dodge taxes. Ireland appealed that ruling, but EU rules require that Ireland make an effort to recover the money while awaiting the results of the appeal.
Today, the EU said that Ireland had failed to move to recover the tax money from Apple, missing a January deadline to do so. The EU referred the case to the European Court of Justice, saying Ireland is claiming it may not begin the recovery process before March 2018.
The aggressive stance by the EU reflects the broader frustration across Europe that U.S. tech giants have been using various member states to dodge taxes. Last month, the EU began to take formal steps to levy higher taxes on U.S.-based tech companies operating in Europe.