European Union authorities have ordered Amazon.com, Inc. (NASDAQ: AMZN) to pay almost $300 million as back taxes to their member state Luxembourg. The EU said that the United States company has made massive benefits from the illegal tax arrangement it made in 2003. The e-commerce giant is one of the many American technology companies to face tax penalties within the Eurozone. A spokesperson for Amazon said that the company may file an appeal.
The EU has charged that Amazon put a substantial chunk of its profits within a holding company based in Luxembourg. This permitted the company to sidestep the paying of taxes on its profits made in Europe during the 2006-2014 period. As per Luxembourg's tax laws, the limited partnership, the Amazon holding company, has no business activities, employees, and offices. The company thus was not subjected to any kind of corporate tax. This arrangement helped Amazon to be more economically efficient. In their statement, the EU authorities said that Luxembourg provided illegal tax advantages to Amazon. The result of such a move was that nearly three quarters of the profits generated by the company were not subjected to taxation. The spokesperson pointed out that it is illegal for member states to provide selective tax benefits towards multinational groups unavailable to other commercial entities.
The EU Commission, in a separate judgment on October 4, said that it would haul Ireland to the courts for the country's failure to collect almost 13 billion Euros. This amount is the back tax to be taken from Apple within January. This US company paid a measly 0.0005 percent on its profits made in the European Union for more than 10 years.
Other companies like Engie, the French utility company, and McDonald's, the fast food multi-national company, are also subject to investigation for Luxembourg tax practices. These companies are among the many international companies which were ordered by EU during the last few years to pay their back taxes. The list of such companies included Starbucks, Anheuser-Busch InBev, BP, and Fiat.
Amazon, in its defense, claimed that it did not break any rule. The biggest online retailer in the globe made a $2.4 billion profit on the back of $136 billion revenues. In an email, the company spokesperson said that the company was not a recipient of special treatment. The spokesperson claimed that the tax was paid as per the Luxembourg laws and also as per the international tax law.