EU Orders Recoup of $300 Million in Amazon Back Taxes -- Update

By Natalia Drozdiak and Sam Schechner Features Dow Jones Newswires

The European Union on Wednesday upped the stakes in its push to collect taxes from U.S. tech giants, pressing its cases against Amazon.com Inc. and Apple Inc.

Continue Reading Below

The European Commission, the bloc's antitrust regulator, ordered Luxembourg to recoup EUR250 million ($294 million) from Amazon in allegedly unpaid taxes.

The EU said Luxembourg had granted the e-commerce giant illegal state aid in the form of a 2003 sweetheart tax deal, which was prolonged in 2011, that illegally lowered Amazon's tax payments to the Grand Duchy.

The regulator also referred Ireland to the bloc's highest court, the European Court of Justice, for failing to implement last year's blockbuster decision that Dublin retrieve roughly EUR13 billion from Apple in uncollected taxes. The regulator had said Dublin's illegal tax benefits allowed Apple to avoid paying that money.

The decisions are part of a broader effort by the EU to wring more money out of technology giants in Europe through various means.

"Companies must pay their fair share of taxes," said EU antitrust chief Margrethe Vestager at a press conference. "Amazon was allowed to pay four times less tax than other local companies subject to the same national tax rules."

Continue Reading Below

"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," an Amazon spokesman said in response. Amazon added that it would consider an appeal.

Luxembourg said it took note of the decision, adding that Amazon hadn't been granted incompatible aid because it had been taxed in accordance with the tax rules applicable at the time.

Both Amazon and Luxembourg can appeal the decision.

The EU's antitrust regulator has scrutinized thousands of tax deals between governments and large multinationals and has opened formal investigations in a cluster of those--the highest profile of which have centered on large U.S. tech giants but also include McDonald's Corp. and Engie SA.

In her announcement of the EU's decision to refer Ireland to court, Ms. Vestager said "more than one year after the commission adopted this decision, Ireland has still not recovered the money, also not in part."

Both Ireland and Apple are appealing the EU's decision announced last year. The implementation of the decision has been partly held up as both Ireland and Apple negotiate over the terms of a deal to protect Dublin from any losses while it holds the company's dues in an escrow account while the appeal plays out.

"It is extremely regrettable that the commission has taken this action, especially in relation to a case with such a large scale recovery amount, " Ireland's Finance Ministry said in a statement. "Ireland has made significant progress on this complex issue and is close to the establishment of an escrow fund."

Apple didn't immediately respond to a request for comment.

In addition to the EU's antitrust regulator's scrutiny of tax deals, France and Germany and other EU countries are pushing to change legislation. The countries want to better account for the revenue tech companies rake in from virtual operations, such as targeted advertising.

Write to Natalia Drozdiak at natalia.drozdiak@wsj.com and Sam Schechner at sam.schechner@wsj.com

(END) Dow Jones Newswires

October 04, 2017 06:31 ET (10:31 GMT)