Competition chief Margrethe Vestager indicated the European Commission (EC) will likely scrutinise more so-called sweetheart tax deals as she slapped the online retailer with a €250m bill for back taxes.
Amazon’s arrangement with Luxembourg amounted to state aid, she ruled, and the company was “allowed to pay four times less tax than other local companies subject to the same national tax rules”.
Amazon said it did not receive any special treatment and “paid tax in full accordance with both Luxembourg and international tax law". It is considering its legal options but is expected to appeal the decision. Tax law experts believe it will be upheld, but the sum owed could be reduced.
Luxembourg said Amazon “has been taxed in accordance with the tax rules applicable at the relevant time”, adding that it’s fully cooperating with the commission and is committed to tax transparency and "the fight against harmful tax avoidance".
And in a separate but similar case, the EC will take Ireland to the European Court of Justice to force it to recoup €13bn from Apple after ruling the irish government has been slow to act. “More than one year after the commission adopted this decision, Ireland has still not recovered the money," said Vestager.
The iPhone maker was slapped with the record tax bill last year after the commission ruled its deal with Ireland also amounted to state aid. It is up to the country to collect the cash.
Ireland insisted it is "fully committed” to ensuring the recovery of the money, despite disagreeing with the ruling, and “has committed significant resources to ensuring this is achieved”.
The Irish finance ministry added that the latest action was "extremely disappointing", "regrettable" and "wholly unnecessary" in a strongly worded statement.
The EC is now likely to target other “household names that are easy to vilify” said John Cassels, competition and trade partner at law firm Fieldfisher, noting the greater appetite for action against Silicon Valley among the public in recent months.
Several EU member states last month signalled their intention for coordinated action on tax, with France and Germany among nine countries to back proposals to apply it to turnover rather than profit.
The latest action by the EU competition commission is likely to inflame tensions between Europe and the US. Business groups and politicians across the pond have previously warned that such actions are detrimental to economic growth.
Cassel added that the current political environment made it unlikely that the UK would seek to become a low-tax destination post-Brexit.