The European Union is expected Wednesday to levy a massive fine against Amazon for allegedly evading the appropriate amount of tax payments, according to the Financial Times.
By using Luxembourg for tax filing purposes, the European Commission argues that Amazon established an unfair partnership in order to dodge paying roughly 3 billion euros ($3.53 billion USD). Luxembourg set up an effective cap on the tech conglomerate’s taxable profits, a ceiling the EU says gave it an unfair upper hand in the business ecosystem, according to the Financial Times.
The commission wants Amazon to pay for the $4 billion euros in royalties it avoided. Amazon allegedly paid 1 billion euros in royalties to the U.S., but reportedly did not do so for the remaining 3 billion euros. (RELATED: Amazon Founder Temporarily Passes Bill Gates As Richest Man In The World)
The purported scheme lasted almost a decade, while the EU investigation commenced around three years ago.
The EU is currently considering a tax plan that would remove money-saving loopholes capitalized on by Amazon, and others. Companies, including ones in the U.S. tech industry, utilize the workaround because many feel as if money earned overseas is taxed at way too high of a rate. President Donald Trump proposed a one-time repatriation tax of 10 percent for company’s capital held overseas, rather than the usual rate of 35 percent. Apple CEO Tim Cook expressed support for the proposal, adding that such funds should be used “for a significant infrastructure spend in the U.S. because it creates jobs.”
European states and international governing bodies like the EU have been monetarily punishing U.S. companies for other reasons, like ostensibly improper data collection (in which American law seems to differ). But accusations of tax evasion, specifically using certain states as tax havens, are steadily growing.
The EU issued a $14.5 billion tax on Apple last year, saying it must pay it to Ireland (which is effectively a member of the EU).
Margrethe Vestager, the commissioner in charge of competition policy, said in a press conference at the time that “the Commission’s investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years. In fact, this selective treatment allowed Apple to pay an effective corporate tax rate of 1 per cent on its European profits in 2003 down to 0.005 per cent in 2014.”
Ireland, in response, defended its decision and corporate tax rate. Then-Irish Finance Minister Michael Noonan told the press “I disagree profoundly with the Commission’s decision,” according to The Wall Street Journal, and added that the country intends “to defend the integrity of our tax system.” (RELATED: Google Is Lawyering Up In Europe After Record Fines)
A year later, Ireland continued its argument.
“We are not the global tax collector for everybody else,” Irish Finance Minister Paschal Donohoe said, Reuters reports. “We must be very careful not to endanger our reputation as advocates for free trade.”
Several U.S. congressmen on both sides of the aisle also expressed their anger over the EU’s demands.
Republican Rep. Kevin Brady of Texas, for example, called it “a predatory and naked tax grab.”
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