Amazon has today been told to pay an unpaid tax bill of £221.5million because its ‘sweetheart deal’ with Luxembourg amounted to state aid, EU Commissioner for Competition Margrethe Vestager said today
Amazon today faces an unpaid tax bill of £221.5million (250m euros) because its ‘sweetheart deal’ with Luxembourg amounted to state aid.
The European Commission said the perks offered to the American retail giant amounted to ‘illegal tax benefits’.
Amazon paid just £15million in taxes on £19.5billion in sales across Europe last year, according to its most recent accounts.
The new £221.5million tax bill is also deeply embarrassing for Commission president Jean-Claude Juncker, who was Prime Minister of Luxembourg when the deal was struck.
But EU Commissioner Margrethe Vestager said her boss’ involvement will not be probed and said today: ‘We try to investigate the behaviour of member states – it is not a criminal investigation into different persons’.
Last year she hit Apple with a £11.5 billion (13billion euro) tax bill after an investigation found the firm paid 50 euros in tax for every million euros of profit made outside the US in 2014.
But Ireland – the country the tech giant was ordered to pay the cash to – appealed the decision to ensure Apple didn’t have to pay, and Luxembourg is now expected to do the same.
Scroll down for video
Online retail giant Amazon is facing a bill of at least 250 million euros (£221.5 million) in back taxes after the European Commission ruled its tax affairs failed to comply with state aid rules
Today the European Commission say a deal struck by Amazon and Luxembourg amounts to illegal state aid, in its latest crackdown on a multi-national business.
Under the arrangement, Amazon funnelled cash made from sales across all its European businesses – including £7.3bn from the UK – through a company based in Luxembourg.
This company then pays ‘royalties’ to another entity based there for using the American tech giant’s branding and services, cutting the remaining profits which it can be taxed for.
The finding that Luxembourg has allowed Amazon to pay too little tax is embarrassing for Jean-Claude Juncker, the outspoken president of the European Commission (pictured on Friday)
Meanwhile, the royalties paid to the separate entity are not taxed because it is a type of business not considered a tax resident in Luxembourg.
At the centre of the dispute is how much Luxembourg has allowed to be paid in royalties, because the higher they are the less cash is left in profits to be taxed overall.
Margrethe Vestager, the European Union’s competition commissioner, will now order officials in Luxembourg to go back and charge it higher rates of tax.
The commission launched its investigation into their deal in 2014.
The finding that Luxembourg has allowed Amazon to pay too little tax is embarrassing for Jean-Claude Juncker, the outspoken president of the European Commission.
Mr Juncker has lectured member countries of the European Union about the importance of having a level playing field for economies across the bloc.
But he was prime minister of Luxembourg when the deal with Amazon was struck, raising questions about how much he knew of the arrangements.
The row with Amazon is the latest move by the commission against American tech giants, who have been accused of using complex company structures to pay less tax.
Apple was handed a record £11.5bn bill for back-taxes in Ireland last year, with Google also handed competition fines of £2.1bn earlier this year.
The crackdown has infuriated politicians in the US, who are trying to repatriate more of the companies’ foreign profits to boost American coffers.
They have threatened retaliation against Europe and warned it could harm investment from across the Atlantic.
Ireland refuses to take Apple’s £1.1bn tax money so the EU is now taking the country to court
EU Commissioner for Competition Margrethe Vestager said that Ireland will be taken to court
Ireland faces legal action for failing to recover 13 billion euros (£11.5 billion) in tax from US tech giant Apple after European competition authorities blasted the country over a sweetheart deal.
The European Commission said Ireland had not recouped any of the money despite a year passing since it ruled that the iPad and iPhone maker had gained an illegal advantage over other businesses by paying significantly less tax.
While the competition watchdog slapped the country with a deadline of January 3 this year, Ireland is no closer to raking in the funds and is only expected to have pinpointed the exact amount of aid it dished out to Apple by March 2018.
It comes as the Commission took a double swipe at US tech industry by landing Amazon with a bill of around 250 million euros (£221 million) in back taxes after stating that the firm’s sweetheart tax deal with Luxembourg broke state aid rules.
Margrethe Vestager, Europe’s competition commissioner, said: ‘Ireland has to recover up to 13 billion euros in illegal state aid from Apple.
‘However, more than one year after the commission adopted this decision, Ireland has still not recovered the money, also not in part.
‘We of course understand that recovery in certain cases may be more complex than in others, and we are always ready to assist.
‘But member states need to make sufficient progress to restore competition. That is why we have today decided to refer Ireland to the EU Court for failing to implement our decision.’