The European Union has told Amazon to pay about 250 million euros to Luxembourg in back taxes. European authorities concluded after a three-year-long investigation that the tech giants had benefited from an illegal tax arrangement. The penalty was only a fraction of the 13 billion euros Apple Inc. was ordered to pay Ireland recently.
“Luxembourg’s illegal tax advantages to Amazon had allowed almost three-quarters of the company’s profits to go untaxed, allowing it to pay four times less tax than local rivals,” said Margrethe Vestager, the EU commissioner.
The commission said that Amazon had profited from an illegal tax deal granted by the Luxembourg authorities that enabled the company to reduce its tax by €250m. The company has been asked to repay the whole amount including interest.
Amazon has denied the findings of the Commission. “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,” a company spokeswoman said. “We will study the Commission’s ruling and consider our legal options, including an appeal.”
The Commission said that Luxembourg had allowed Amazon to direct a significant amount of its profits to a holdings company without paying tax as it held some intellectual property rights over it. “The Commission’s investigation showed that the level of the royalty payments, endorsed by the tax ruling, was inflated and did not reflect economic reality,” the Commission said.
Furthermore, the Commission said it would take Ireland to the European Court of Justice for failing to collect €13bn from Apple Inc. Ireland reacted furiously, saying it “is extremely disappointing that the Commission has taken action at this time.” And said it was busy working on a deal and had made a significant progress.