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US Treasury 'deeply concerned' by Commission tax crackdown
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US Treasury 'deeply concerned' by Commission tax crackdown

by hb 3 min. 27.11.2017 From our online archive
European Commission says Luxembourg must collect €250 million from Amazon after it found the US online retailer received undue tax benefits that amounted to illegal state aid.
Amazon has its European headquarters in Luxembourg, where it employs 1,500 people. Photo: Pierre Matgé

The US Treasury is "deeply concerned" by the European Commission's effort to recoup back taxes from American companies, after Luxembourg was ordered to retrieve €250 million from Amazon.

The Commission ruled Luxembourg must collect the multi-million euro bill from the US online retailer following an investigation that found a 2003 tax deal gave Amazon undue tax benefits that amounted to illegal state aid.

The move is part of a broader crackdown on US tech companies' use of tax loopholes in Europe. The Commission also referred Ireland to the European Court of Justice this week for failing to recover up to €13 billion from Apple.

A spokesman for the US Treasury said the Commission's approach to state aid cases was "unfair", ran contrary to "well-established legal principles" and called into question the tax rule of EU member states.

"While we do not comment on the specifics of any case, the Treasury Department is deeply concerned that the European Commission continues to impose retroactive tax assessments on US companies," said a US Treasury spokesman.

"Furthermore, the Commission’s unilateral actions threaten to undermine principles of tax certainty and the successful rules-based economic partnership between the Europe Union and the United States."

The spokesman said the US Treasury will continue to monitor the cases and make clear its objections.

EU Competition Commissioner Margrethe Vestager is leading the crackdown for the Commission. On Wednesday, she said Amazon had been allowed to pay four times less tax than other local companies.

"Member states cannot give selective tax benefits to multinational groups that are not available to others," she said.

The ruling related to a 2003 agreement struck between Amazon and Luxembourg, which the Commission said allowed Amazon to shift the vast majority of its profits to a holding company that was not subject to tax.

The deal allowed Amazon to place its intellectual property rights in a holding company Amazon Europe Holding Technologies. The operating company Amazon EU, which records all of Amazon's sales in Europe, then paid royalties to that company.

The Commission found that the level of royalty payment from the operating company to the holding company was inflated and "did not reflect economic reality".

Amazon contested the Commission's findings and said it would consider legal options. Luxembourg's Finance Ministry said the international and Luxembourgish legal frameworks had "substantially evolved" since 2006 and the company had not been granted "incompatible state aid".

Gerdy Roose, head of tax at accountancy firm BDO, said he agreed with the Luxembourg government that was not correct to apply future rules to an old situation.

"Here I think what is shocking the Commission is that the profit is not immediately taxed, but it will be taxed by the US when repatriated to the US. That's just tax planning which is totally legal, its not tax avoidance, its tax deferral. At the end the US will tax what needs to be taxed,” he said.

"If you do not repatriate, it's not taxed: that's a US rule. We have to accept that the US can have that kind of rule. We would probably not accept that the US says how we levy tax in the EU. They have their rules, we have to respect their rules. "  

Roose said the international tax rules were changing via the BEPS initiative and the Anti Tax Avoidance Directive which would change the situation and introduce more coherence between tax regime in different countries.