EU hammers tech giants over taxes

BRUSSELS: The European Union turned the screw on US tech giants yesterday, ordering Amazon.com Inc to repay Luxembourg €250 million ($294 million) in back taxes and referring Ireland to the top EU court for failing to collect billions from Apple Inc.

EU Competition Commissioner Margrethe Vestager accused tiny Luxembourg of an illegal deal with Amazon to pay less tax than other businesses.

The two cases are part of a wider offensive by the EU on Silicon Valley behemoths as Europe seeks ways to regulate them more tightly on issues ranging from privacy to taxation.

“Luxembourg gave illegal tax benefits to Amazon. As a result, almost three quarters of Amazon’s profits were not taxed,” Vestager said in a statement.

The tax demand comes a year after the hard-charging Vestager ordered tech icon Apple to repay €13 billion ($14.5 billion) in back-taxes to Ireland in a decision that shocked the world.

In a sign that it was not letting up, the EU yesterday referred Ireland to the EU’s highest court for failing to collect the bill.

“The European Commission has decided to refer Ireland to the European Court of Justice for failing to recover from Apple illegal state aid,” the EU’s antitrust regulator said in a statement.

For its part, Amazon rejected the charges and said it would “study the commission’s ruling and consider our legal options”.

“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.”

Vestager’s announcement comes days after the EU said at a special digital summit that it was drawing up a special tax targeting Google and Facebook, a policy championed by French President Emmanuel Macron.

Vestager denied that the cases singled out tech giants from the United States.

“It’s not about the nationality of the companies. I take it very seriously. No bias, no matter your flag,” she said.

Ireland said the referral to the EU court was “extremely disappointing”, calling the decision “wholly unnecessary”.

For its part, Amazon sharply rejected the allegations, arguing that it employs 1,500 people in Luxembourg and that its business remains unprofitable in Europe.

“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,” it said in a statement, adding that it would study its legal options.

Launched in 2014, the European Commission’s probe into Amazon’s deals with Luxembourg was part of several investigations into sweetheart tax arrangements between major companies and several EU countries.

The Amazon case hinges on the belief that a tax deal between Luxembourg and Amazon in 2003 constituted illegal “state aid”, giving the company an unfair advantage over competitors.

The arrangement, which has since been discontinued, “enabled Amazon to shift the vast majority of its profits from an Amazongroup company that is subject to tax in Luxembourg to a company which is not subject to tax.”

The latter was an “empty shell” with no employees, no offices and no business activities, the commission said.

Once found at fault, a country must recover the amount granted in illegal state aid, potentially a huge amount of money given that some of the tax deals date back many years.

Many of the Brussels probes came in the wake of the “Luxleaks” scandal which revealed details of tax breaks given by the wealthy duchy to dozens of major US firms.