In this 2013 photo, the internet trader Amazon logo is seen behind barbed wire at the company’s logistic center in Rheinberg, Germany. (AP Photo/Frank Augstein, File)

In this 2013 photo, the internet trader Amazon logo is seen behind barbed wire at the company’s logistic center in Rheinberg, Germany. (AP Photo/Frank Augstein, File)

Amazon must pay $295 million in back taxes, EU says

Officials say the company has unfairly profited from special tax conditions in tiny Luxembourg.

By Raf Casert / Associated Press

BRUSSELS — Amazon has to pay $295 million in back taxes to Luxembourg, the European Union ordered Wednesday, in its latest attempt to tighten the screws on multinationals it says are avoiding taxes through sweetheart deals with individual EU states.

Margrethe Vestager, the EU official in charge of antitrust issues, also took Ireland to court for failing to collect a massive 13 billion euros ($15.3 billion) in back taxes from Apple Inc.

She argued that, like in Amazon’s case, the company had profited from a deal with the country that had allowed it to avoid paying most of the taxes the EU felt were due.

The EU has taken aim at such past deals, which member states had used to lure foreign companies in search of a place to establish their EU headquarters. The practice led to EU states competing with each other and multinationals playing them off one another.

EU states are now trying to harmonize their tax rules, but Wednesday’s and previous rulings seek to redress years of tax avoidance.

Vestager said that U.S. online retailer Amazon had unfairly profited from special low tax conditions since 2003 in tiny Luxembourg, where its European headquarters are based.

As a result, almost three quarters of Amazon’s profits in the EU were not taxed, she said.

“In other words, Amazon was allowed to pay four times less tax than other local companies subject to the same national tax rules,” she said. The issue is not so much that the companies got tax breaks but that they were available only to them.

Amazon said it believed it had not received any special treatment from Luxembourg and would consider appealing. “We paid tax in full accordance with both Luxembourg and international tax law.”

EU states like Luxembourg and Ireland that have deals with multinationals are put in difficult positions with such rulings. They don’t want to scare away the companies by hiking their tax bills but also want to fall in line with the EU’s efforts to create an even playing field — as well as show taxpayers that big foreign companies are paying their fair share. The issue of corporate tax avoidance became a hot topic in the EU after the financial crisis, when governments had to raise taxes and slash spending to get public finances back into shape.

Luxembourg said it might appeal Wednesday’s ruling, but stressed it is “strongly committed to tax transparency and the fight against harmful tax avoidance.”

Analysts say that beyond claiming the sums of money owed, the EU’s move is meant to create a public awareness of the issue of tax avoidance by multinationals, in effect shaming individual EU states and the companies while the bloc works on harmonizing its tax rules.

“Corporations are sensitive to being positioned as tax avoiders,” said Louise Gracia, a professor at the Warwick Business School who researches tax issues.

The EU investigation was made particularly awkward by the fact that the current European Commission President, Jean-Claude Juncker, was Luxembourg’s prime and finance minister at the time the tax system for Amazon was set up.

“We try to investigate behavior from member states. It is not a criminal investigation trying to incriminate different persons in the positions that they hold,” Vestager said.

Vestager had already ordered Ireland to claw back up to 13 billion euros from Apple last year, but said Wednesday that Ireland hadn’t recovered any money so far.

Ireland, which is appealing last year’s decision, reacted angrily, saying it “is extremely disappointing that the Commission has taken action at this time.” It said it was busy working on the deal and had made “significant progress.”

Talk to us

More in Herald Business Journal

A Boeing 787 operated by All Nippon Airways taxis under a rainbow created by fire trucks at Seattle-Tacoma International Airport, Monday, Oct. 1, 2012, in Seattle, during an official welcome ceremony after it landed on the first day of service for the aircraft on ANA's Seattle-Tokyo route. (AP Photo/Ted S. Warren)
Last Everett-built Boeing 787 rolls off the assembly line

Production of the once-hot Dreamliner is being consolidated at the company’s South Carolina plant.

Decarla Stinn, owner of Decarla’s Beauty Supply & Salon in Everett, sews in the first row of extensions on Hope Hottemdorf on Wednesday, Feb. 24, 2021 in Everett, Wa. (Olivia Vanni / The Herald)
Her short-term plan to run a beauty supply store went awry

Clients wouldn’t let her quit, and Decarla’s Beauty Supply & Salon in Everett is celebrating 17 years in business.

Erin Staadecker (left-right) Jael Weinburg and Kaylee Allen with Rosie formed the Edmonds firm Creative Dementia Collective. The company helps memory care patients and care-givers by providing art, music and other creative therapies. (Kevin Clark / The Herald)
This startup offers artful therapy for dementia patients

Creative Dementia Collective uses art and music to help them — and their caregivers.

The nose of the 500th 787 Dreamliner at the assembly plant in Everett on Wednesday morning on September 21, 2016. (Kevin Clark / The Herald)
U.S., EU agree to suspend tariffs in Boeing-Airbus dispute

The move eases a 17-year transatlantic dispute over illegal aid to the world’s biggest aircraft makers.

Karuana Gatimu of Snohomish, director of the customer advocacy group at Microsoft Teams Engineering. (Kevin Clark / The Herald)
Microsoft executive: Tech opportunities for women have grown

The sector hasn’t always been friendly to women or people of color, but it’s getting better, says a Snohomish resident.

Dawn Trudeau (Seattle Storm)
13 years ago this month, they bought the Seattle Storm

Dawn Trudeau and her partners didn’t foresee the challenges — or the championships — that were in store.

Elwin Pittman, 10, plays foosball with Ashley Kiboigo in the game room during a break at Safe Haven Cafe on Friday, Feb. 26, 2021 in Everett, Wa. (Olivia Vanni / The Herald)
Born of the pandemic, this business is a parental reprieve

Ashley Kiboigo’s Safe Haven WiFi Cafe in Everett is a place for kids to study and play.

Decarla Stinn (top left), Karuana Gatimu (top right), Dawn Trudeau (bottom left) and Ashley Kiboigo (bottom right).
Getting down to business during Women’s History Month

There have been great gains over the years, but challenges remain — especially this year.

(Getty Images)
You voted: The best cocktails in Snohomish County

Even during a pandemic, people still have their favorites.

Most Read