The European Commission has concluded that Amazon received “undue tax benefits” in Luxembourg to the amount of around €250 million. The Commission says that Luxembourg must make Amazon pay back the entire amount as substantial tax benefits are considered to be illegal aid.
The European Commissioner for Competition, Margrethe Vestager, summed up the case in a statement:
“Luxembourg gave illegal tax benefits to Amazon. As a result, almost three quarters of Amazon’s profits were not taxed. In other words, Amazon was allowed to pay four times less tax than other local companies subject to the same national tax rules. This is illegal under EU State aid rules. Member States cannot give selective tax benefits to multinational groups that are not available to others.”
.@amazon tax benefits in Luxembourg are illegal under our common European rules on state aid. Amazon to repay benefits worth around €250 mio
— Margrethe Vestager (@vestager) October 4, 2017
Vestager and the Commission came to this conclusion after a three-year long in-depth investigation. The investigation found that the Luxembourg’s tax ruling on Amazon in 2003, and prolonged in 2011, didn’t include any “valid justification” for lowering the tax paid by the American tech giant. The commission is also looking into the unusually low taxation of McDonald’s and GDF Suez in Luxembourg.
“We will study the Commission’s ruling and consider our legal options, including an appeal. Our 50,000 employees across Europe remain heads-down focused on serving our customers and the hundreds of thousands of small businesses who work with us,” said Amazon’s spokesperson.
The ruling against Amazon is the latest installment of Vestager’s and the EU’s crackdown on unjust competition by tech giants. Earlier this year, Google was handed a massive €2.4 billion fine for abusing its market dominance to give an advantage to its own shopping services. Google is currently fighting the fine, but it’s unlikely to succeed, and there are more anti-trust cases against Google being prepared by the EU on Android and Adsense.
Vestager and the Commission continue to go after more tech giants that are taking advantage of EU countries with lax tax regulation. Last year, the Commission found that Ireland had given illegal tax benefits to Apple worth up to €13 billion.
This doesn’t come as surprise as many big companies look towards Ireland for establishing their European and international operations, such as Facebook, which is generally considered to be a part of tax avoidance tactics.
[Update]: This story was updated with Amazon’s comments.