How much trouble is Amazon in?
The European Union is scrutinising Amazon’s tax relationship with Luxembourg, as regulators look to crackdown on tax-avoidance measures they claim are costing the bloc $1.3 trillion a year
Amazon’s just the latest multinational to come under the EU’s steely glare, with the tax affairs of Apple, Google, Starbucks and Fiat already being scrutinised. Regulators are worried that so-called “sweetheart” deals, which involve countries tossing lower tax rates at huge companies to encourage investment, are distorting the market.
Which countries are we talking about?
So far Ireland, Netherlands and Luxembourg have all been asked to show their sums, though a European Commission spokesperson told Esquire Weekend these are just “fact-finding missions”, not formal investigations. Even so, the action is being welcomed across France, Germany and the UK, all of which have campaigned to tighten tax laws across the EU.
What’s the problem?
Ireland taxes big businesses as little as 12.5 percent, as opposed to countries such as France which demand a 34 percent cut of a company’s earnings. This makes it much more likely companies will base themselves in Ireland, even if the bulk of their sales are in France. The situation got particularly tetchy in 2010, when the EU was forced to bail out a near-broke Ireland to the tune of $90 million. France claimed Ireland’s reckless tax policy was the reason for their plight, while Ireland argued that without some incentive it couldn’t draw investment in the first place.
What do the companies have to say for themselves?
We asked them and received stock answers across the board. They’re complying with local laws and believe they’re contributing to local economies through job creation.
So what happens next?
If the case progresses to a formal investigation, the countries can be forced to recoup the tax at the rate it should have been paid. The EU also has the power to force a law change, though EU competition commissioner Joaquín Almunia said “this is too early to talk about” at a press conference.
But surely nothing will ever come of it though, will it?
We wouldn’t be so sure. An EU spokesperson pointed us towards a case in 2011, when the Spanish government was forced to recoup undisclosed sums from telecoms companies Telefónica and Iberdrola, which had been offered tax breaks as an incentive for buying foreign companies. The EC ruled the breaks had distorted the market