Daily Management Review

$295 Million In Luxembourg Back Taxes Ordered To Be Repaid By Amazon By EU


10/04/2017




In what is the latest U.S. tech company to be caught up in a European Union crackdown on unfair tax deals, Amazon was told to pay about 250 million euros ($295 million) in back taxes to Luxembourg.
 
The fine is only a fraction of the 13 billion euros that Apple Inc was ordered to pay to Ireland last year and was much lower than some sources close to the case had expected.
 
A tough line on multinational companies’ approach to tax has been adopted by EU Competition Commissioner Margrethe Vestager, who has other big U.S. tech companies in her sights.
 
“Luxembourg gave illegal tax benefits to Amazon. As a result, almost three quarters of Amazon’s profits were not taxed,” Vestager said.
 
Amazon said it was considering an appeal.
 
“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,” Amazon said in a statement after the announcement.
 
There was little change in the shares of Amazon even after the announcement.
 
Vestager said that her approach was not biased against foreign companies even though the EU has taken on several U.S. tech companies, both in antitrust and in tax avoidance cases.
 
“This is about competition in Europe, no matter your flag, no matter you ownership,” Vestager said.
 
Aiming to close the loopholes used to reduce tax bills, a call for more integrated corporate tax regimes in Europe has been given by French President Emmanuel Macron which has been welcomed by her.
 
About a year ago there were speculations in the media that Amazon would be fined 400 million euros as this was being considered by Vestager, but the 250 million euros is significantly less than that amount even though the exact amount Amazon needs to repay is yet to be calculated.
 
Amazon shielded around 900 million euros in EU profits from tax, the Commission believes as suggested by the bill.
 
Making only $2.4 billion profit on global revenues of $136 billion in 2016, Amazon has worked on razor thin profit margins to fuel its global expansion for most of its existence.
 
Without paying tax, Amazon was allowed to channel a significant portion of its profits to a holding company by Luxembourg, the Commission said. Because the holding company held certain intellectual property rights, it was allowed to do this.
 
Setting up of a subsidiary in a country where profits of a company are not taxed and those that have unit license the intellectual property to other overseas affiliates, and then sell intellectual property, like brands or patents, to the subsidiary is an important way that companies use shift profits out of the United States, say tax advisers.
 
Also subject of a $1.5 billion court case with U.S. tax authorities, which Amazon won in March, was Amazon’s corporate set up with subsidies in Luxembourg.
 
One of the biggest employers in the country of half a million people is Amazon, which employs 1,500 in the grand duchy. It has a Europe-wide staff of some 50,000.
 
(Source:www.reuters.com) 






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