As the campaign of EU authorities against deals that assists largest companies cut down on tax bills progresses, Amazon has been requested to reimburse €250m (£222m) in illegal state aid to Luxembourg.
The EU commissioner in charge of competition, Margrethe Vestager, said that Luxembourg’s “illegal tax advantages to Amazon” had permitted just about seventy-five percent of the organization’s benefits to go untaxed, enabling it to pay four times less tax than local competitors.
Vestager said: “This is about competition in Europe, no matter your flag, no matter your ownership,” disregarding the insinuation that she was focusing on non-European organizations. “Paying taxes is part of doing business in Europe,” she added.
Many politicians and business groups in Europe argue that the open-handed tax gaps give Amazon an unjust advantage over the competition. This was what led to the latest announcement of a plan to change the EU tax rules.
The commission said Amazon had profited from an illicit tax deal granted by the authorities of Luxembourg, which enabled the company to falsely lessen its tax bill from 2006 to 2014 by €250m. The e-commerce giant has been requested to reimburse everything, interest included.
And of course, Amazon dismissed the discoveries of the investigation of the commission. The company said: “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.”
Luxembourg’s government also commented: “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.”
This case against Amazon is focused on the two Amazon’s subsidiaries located in Luxembourg, the Amazon Europe Holding Technologies and Amazon EU group. The commission described the former as “an empty shell” with no offices or employees but was used to reduce the tax bill of the company.
Amazon’s blueprint was Project Goldcrest, a tax scheme named after the national bird of Luxembourg, based on a deal with authorities in the Grand Duchy in 2003. In June 2014, Amazon changed its tax operations, which was a year after Brussels began investigating tax rulings across the EU.
US authorities have also been investigating Project Goldcrest but lost in court to the retail firm. In March a court ruled against the Internal Revenue Service, which had argued Amazon owed the US $1.5bn (£1.13bn) in unpaid taxes linked to its Luxembourg companies.
Also, Amazon is not the only company hit by this new development, the EU commission has ruled unlawful tax deals between Starbucks and the Dutch authorities, as well as Fiat’s arrangements with Luxembourg.
The funny thing, however, is that Jean-Claude Juncker (the present EU Commission president) was the Prime minister of Luxembourg between 1995 and 2013. During most of that time, he also served as the finance minister, which made him an official, making the tax arrangements possible. Now, he is the one heading the organization that is condemning the same deals he helped make.