Amazon and Apple back taxes have to be paid according to the European Commission. This involves a €250 million ($293, £221) back taxes bill for Amazon and also back taxes that Apple owes Ireland. Amazon denies that it owes any back taxes to the EU. So what’s the background to the EU demands?
The European Commission is behind all this. So first of all, what is the European Commission and what powers does it have to demand back taxes from large corporations? The European Commission fundamentally runs the activities of the EU. It plays a leading role in the administration of the EU and in policy making. It has the authority to ensure that businesses operating within EU meet their tax obligations.
The reason for the European Commission targeting Amazon is that it believes the company was given an unfair tax arrangement with Luxembourg. According to Margrethe Vestager, the European Competition Commissioner, Amazon had been permitted to pay lower taxes than “other businesses” in the EU. This is illegal according to EU state aid rules.
It is a fundamental European ethos that all business operating within the EU must comply with EU laws – and this includes its tax laws. No country, including Luxembourg, can override these laws to offer tax breaks to large corporations.
A result of this arrangement between Amazon and Luxembourg was that Amazon was able to avoid paying tax on almost 75% of its profits. This resulted in Amazon paying four times less tax than other local businesses. Tax benefits must be equal between all companies, and not only offered to multinational corporations.
The European Commission has also targeted Apple. It claims that Apple owes around €13 billion of back taxes to the EU. The Commission intends to take the Republic of Ireland to court over these unpaid taxes. This is because it considers that tax benefits offered last year were illegal under EU law. These benefits allowed Apple to pay only 1% corporate tax on its profits.
Because Ireland has done nothing to recover these unpaid taxes, it will be referred to the European Court of Justice. Both Apple and Amazon deny the claims being made by the European Commission. However, it is unlikely that the European Commission will lose their claim. Otherwise, it may be seen that large corporations can override European tax laws – and that will not happen.
Amazon and Apple back taxes must be paid. Both companies will have to abide by the same tax laws that apply to local European businesses. Local member states, such as Luxembourg and Ireland, may also be reminded of their obligations regarding tax collection – and tax deals!
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