Amazon Ordered Pay Back Taxes To Luxembourg
Amazon (NASDAQ:AMZN) has been ordered to pay back taxes to Luxembourg to the tune of 250 million euros ($295 million). According to the EU commission, Luxembourg gave illegal tax benefits to Amazon and as a result, almost three quarters of Amazon’s profits were not taxed. Amazon recorded only $2.4 billion profit on global revenues of $136 billion in 2016.
Amazon was accused of channeling a significant portion of its profits to a holding company in Luxembourg without paying tax. The holding company holds certain intellectual property rights for Amazon. Tax advisers say selling intellectual property, like brands or patents, to a subsidiary in a low tax country is a primary way for companies to shift profits out of the United States. Those subsidiaries then license the intellectual property to other overseas affiliates.
Documents began circulating in 2014 detailing how large accounting firms helped multinational companies channel proceeds through Luxembourg while paying little or no tax. Luxembourg’s economy has benefited greatly from providing a European base for multinational companies. Amazon is one of the biggest employers in the country, which has a population of about a half a million people.
The fine was much lower than some had expected. Sources close to the matter say the fine is significantly less than the 400 million euros considered by the EU commission last year. In a statement, Amazon said “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.”
Luxembourg firmly rejected the findings of the EU commission. The country’s finance ministry said in a statement, “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.” The country now says it is reviewing its legal options.
The European Union has been cracking down on what it says are unfair tax deals. European Commission President Jean-Claude Juncker says the Commission is committed to ensuring fair taxation. Margrethe Vestager, the EU Competition Commissioner, has taken a tough line on multinational companies’ approach to tax.
The EU commission is also reviewing Luxembourg’s tax deals with fast food chain McDonald’s and French energy company Engie. In 2015, carmaker Fiat was ordered to pay back taxes over its tax deal in the country. Tax for multinationals in Belgium, Ireland, and the Netherlands have also come under Commission scrutiny. Last year, Apple Inc. was ordered to pay 13 billion euros in back taxes to Ireland.
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