The European Commission said this week that Luxembourg tax breaks on Amazon EU revenue amounts to illegal state aid. Archive picture: Margrethe Vestager, EU competition commissioner, speaks during a press conference in Brussels on 27 September 2017. Image credit: European Commission/Lukasz Kobus
“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.”
Vestager’s office found that:
“… the level of the royalty payments, endorsed by the tax ruling, was inflated and did not reflect economic reality. On this basis, the commission concluded that the tax ruling granted a selective economic advantage to Amazon by allowing the group to pay less tax than other companies subject to the same national tax rules. In fact, the ruling enabled Amazon to avoid taxation on three quarters of the profits it made from all Amazon sales in the EU.”
“Luxembourg has taken note of the decision by the European Commission in the Amazon case. Luxembourg will use appropriate due diligence to analyse the decision and reserves all its rights.
“The decision of the commission refers to a period going back to 2006. Over time, both the international and the Luxembourg legal frameworks have substantially evolved. As Amazon has been taxed in accordance with the tax rules applicable at the relevant time, Luxembourg considers that the company has not been granted incompatible State aid, as foreseen by article 107(1) of the Treaty on the Functioning of the European Union.
“Luxembourg has been fully cooperating with the Commission in its investigation and is strongly committed to tax transparency and the fight against harmful tax avoidance. Luxembourg fully adheres to the OECD/G20 BEPS project, which modernises international tax rules and creates a global level playing field.”
Amazon said in press statement:
“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. 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.”