Published On: Fri, Oct 6th, 2017

E.U. Said to Order Luxembourg to Collect Back Taxes From Amazon

The investigation into Luxembourg’s handling of Amazon was made public in 2014, and the commission issued a preliminary finding the following year. In it, it described how the retailer used subsidiaries in Luxembourg to reduce its overall tax obligations.

At the time, the commission said that, in a deal struck in 2003, authorities in Luxembourg had conferred “an advantage on Amazon.” The commission added that the “advantage is obtained every year and ongoing,” and that it “is also granted in a selective manner.”

Amazon does business across the 28-nation bloc, but lists its European headquarters as Luxembourg, a tiny country with a population of around 500,000. The agreement between Amazon and Luxembourg effectively capped the amount of tax Amazon paid, and relied on a method called transfer pricing, according to the commission.

Transfer pricing has long been used by multinational companies to assign profits to different units, depending on factors like their role in the overall business and assets. But, according to the commission, these rules are harder to apply for technology companies, because their assets, like intellectual property, are intangible.

European regulators have claimed that Amazon sent most of its European revenue from one unit in Luxembourg to a separate subsidiary that was not liable to pay corporate tax in the country. As a result, it was able to reduce the profit it generated from its European operations and cut its tax bill, the commission said.

It is not illegal in the European Union for countries to try to lure businesses with low tax rates. But offering special deals to companies that are not available to their competitors can amount to what is known as illegal state aid.

FEATURED  This grill is made of cardboard and is totally sustainable

Both Amazon and Luxembourg’s finance ministry have previously denied that the online retail giant received special tax treatment or benefits.

Amazon has already been in the commission’s cross hairs this year for unfair competition.

In May, the company reached an agreement with Brussels over its e-books business after a two-year investigation. Margrethe Vestager, the European Union’s competition commissioner, had said certain clauses in Amazon’s contracts may have made it more difficult for other e-book platforms to innovate and compete effectively with Amazon. The retailer said it would drop the clauses.

And in January, Amazon agreed with Brussels to end an exclusive deal to supply Apple with audiobooks. Brussels said that step also was likely to improve competition in the bloc.

The cases against Amazon are among several in which the commission has targeted American technology companies. European Union officials are investigating Google and Qualcomm over possible abuses of their dominant market position, while regulators in various countries have investigated Facebook over its handling of customers’ data.

Efforts to curb multinationals from dodging tax have risen in prominence in recent months.

Last month, the European Union began considering new proposals broadly aimed at tax internet companies in the countries where they generate their business, rather than allow them to shift profits to jurisdictions with lower rates.

Luxembourg has been a particular target of increased scrutiny. In 2015, Ms. Vestager imposed an order on Luxembourg to claw back about €30 million from a Fiat Chrysler unit. A decision in a case considering Luxembourg’s treatment of McDonald’s is also still pending.

FEATURED  UPS to convert 1,500 diesel trucks to all-electric systems

The prominence of Luxembourg has put Jean-Claude Juncker, the president of the European Commission, in an awkward position: his role includes oversight of the investigations yet his critics accuse him of having helped turn Luxembourg into a tax haven during his nearly two decades leading that country.

Continue reading the main story

Original Article

Leave a comment

XHTML: You can use these html tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>