Following an investigation by the European Commission, Amazon has been ordered to pay €250 million—approximately $294 million—in back taxes. Nearly 75 percent of Amazon’s European profits from 2003-2011 had not been taxed, the commission found.
Amazon holds a number of subsidiaries in Europe but held its profits in Luxembourg, the location with the lowest corporate tax rate. (A Luxembourg tax ruling lowered Amazon’s tax rate “without any valid justification” for an eight-year period, according to the Commission’s press release.) As a result, Amazon paid “substantially less” taxes than other companies.
“Luxembourg gave illegal tax benefits to Amazon,” Commissioner Margrethe 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. This is illegal under E.U. State aid rules.”
Vestager said that members of the European Union are not allowed to give selective tax benefits to one multinational group and not to others.
The European Commission released a helpful graphic to better explain exactly what Amazon was doing.
Amazon is now being asked to pay back the taxes from 2003-2011, along with a small amount of interest. The Commission says that the sum is not a fine, or any sort of punishment, for Amazon’s behavior.
Amazon is considering an appeal of the decision. In a statement, the company 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. 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.”
Amazon is not alone in its situation: the E.U. has been cracking down on other Silicon Valley powerhouses operating in Europe, as well. Last year, it ordered Apple to pay $14.5 billion in back taxes. (In 2014, Apple had a so-called “sweetheart deal” in Ireland. The company only paid €50 in taxes on every €1 million in profit.) The European Commission also fined Google $2.7 billion for promoting its shopping services over those of competitors.
H/T Business Insider