AMAZON BUSTED FOR TAX EVASION IN EU, APPLE YAWNS
Oops. A recovery order was issued last week against amazon for evading hundreds of millions of euros in back taxes sneaking their money thru Luxembourg. The order was issued by the European Union’s competition commissioner, Margrethe Vestager. In layman’s terms, Amazon got cold busted for tax evasion to the tune of about $300 million USD. That is no mean feat, on average. “Luxembourg gave illegal tax benefits to Amazon. As a result, almost three quarters of Amazon’s profits were not taxed,” Vestager said in a statement. “Amazon was allowed to pay four times less tax than other local companies subject to the same national tax rules.”
EU STATES CAN’T PROVIDE TAX BENEFITS TO INTERNATIONAL COMPANIES, APPLE AND AMAZON FIRST TWO GIANTS OUTED IN GRAND FASHION
The investigation found that Amazon took advantage of these nefarious benefits for eight years, spanning 2006 to 2014. Vestager noted this is illegal in the EU since states are now allowed to give tax benefits to international companies. The order requires Amazon to pay the EU back for 250 million euros, or $294 million USD, to cover the derelict back taxes. This comes about a year after Apple was ordered to pay back the $15 billion it had avoided taxes on after it was discovered those monies all went thru two Irish subsidiaries.
LUXEMBOURG HAD TENDERED AMAZON A “COMFORT LETTER” TO PROVIDE TAX EVASION HAVEN
News of the order first came on Tuesday via the Financial Times, which reported that a nearly three-year investigation by the European Commission had concluded that Luxembourg’s sweetheart deal with the retail giant constituted state aid. In 2003, Luxembourg reportedly sent a “comfort letter” to Amazon guaranteeing it a cap on taxable profits; and in 2004, Amazon “moved its intellectual property, such as software and customer data, into a non-taxable Luxembourg partnership.”
AMAZON EU CLAIMED ONLY 11 MILLION PROFIT ON 60 BILLION NET, HEAD SCRATCHING LEADS TO OBVIOUS INVESTIGATION
A Financial Times analysis of Amazon’s Luxembourg accounts shows that over the next decade, the EU sites paid the partnership nearly €4bn in royalties for using Amazon’s name and know-how. In the same period, Amazon’s European operations reported a total profit of €11m on net turnover of about €60bn.
Amazon kept about three billion of the euros in its Luxembourg partnership; the US has sought to recover some of those funds as well.
AMAZON PLANS APPEAL, SAYS 11 MILLION PROFIT TO BE TAXED OUT OF 60 BILLION NET NO BIG DEAL, TOTALLY LEGAL
In 2016, the Guardian reported on the complexity of the scheme, which used a number of tactics (called “Project Goldcrest”) to shift profits from various arms of Amazon’s global operations to avoid paying higher taxes.
“These findings reveal that not only the multinationals like Amazon abuse the legal insufficiency of the international tax system, but that some states actively help them to do so,” former PricewaterhouseCooper auditor Antoine Deltour told the Guardian.
In a statement shared with multiple outlets, Amazon said it plans to appeal. “We believe that they did not receive any special treatment from Luxembourg and that we paid tax in full accordance with both Luxembourg and international tax law,” the company said.
As the BBC noted, the decision may be rather uncomfortable for European Commission President Jean-Claude Juncker, who was prime minister of Luxembourg at the time the deal was struck.
The finance ministers of some of Europe’s leading economies recently signed a letter to the European Commission demanding changes to the way foreign multinationals are taxed, arguing they currently escape paying huge parts of their legal tax burden.