Amazon and Apple hit by EU tax crackdown

http://www.bbc.co.uk/news/uk-41497459

by T-zex • 9 years ago

137 162 9 years ago

bbc.co.uk

danmaz74• 9 years ago

It's good that the EU is taking steps against these unfair deals, but IMHO it's not enough. In this "web era", we just can't accept that it's enough to open your headquarters in Luxembourg to only pay Luxembourg corporate taxes, when actually your EU operation is like 97% outside of Luxembourg. It's just not sustainable, it needs to change - Luxembourg is just stealing taxes from all other EU countries, that's all.

onli4• 9 years ago

Yes. In a globalized world that model just can't work anymore. That's just siphoning off wealth from all countries to enterprises, backed by one single country.

Sorry to open that can of worms, but taxing on profit in the country (and not headquarter placement) is actually one of the few early Trump suggestions that differed from the mainstream and made sense.

mcny2• 9 years ago

Taxing profit is essentially a tax break for spending. Amazon.com in the US reinvests almost everything it makes back into Amazon from what I understand (please correct me if I'm wrong). Is it ok for them to pay no taxes?

Let's say someone buys $1B worth of junk, has expenses like salary etc of $1B, does something with it and sells products and services worth $2.2B. Do they pay taxes on $2.2B or on $0.2B? I think we can fix some kinds of tax dodging by taxing the $2.2B. If I'm on a low margin business, that's not the government's problem to pick winners and losers, right?

themihai5• 9 years ago

> few early Trump suggestions that differed from the mainstream and made sense.

That doesn't really make sense for America First...Why would US want its corporations taxed with 20% all over EU instead of 1% in Luxembourg? It would be less left to bring back home (whenever the corporate tax is lowered to make that possible).

easytiger12• 9 years ago

Absolute complete nonsense. Not only a misunderstanding of the situation but a crazy and completely incorrect understanding of EEC principles.

This particular problem aside, for there are reasonable nuances from the EUs POV.

Your statment:

we just can't accept that it's enough to open your headquarters in Luxembourg to only pay Luxembourg corporate taxes

Yes. We can. That is quite literally the point of being in the EEC and isn't at all the nuance of the issue Amazon and Ireland have encountered and not something even remotely in question by this report. Complete misrepresentation.

You only pay appropriate taxes in the nation state in which you HQ. This allows poorer countries to compete with richer countries, and allows wealth to "drain" into poorer countries whilst providing cheaper services to the richer ones.

oblio3• 9 years ago

This allows poorer countries to compete with richer countries.

Yes, the poor, starving Grand Duchy of Luxembourg :D

paganel• 9 years ago

You only pay appropriate taxes in the nation state in which you HQ. This allows poorer countries to compete with richer countries, and allows wealth to "drain" into poorer countries whilst providing cheaper services to the richer ones.

Not sure from where you got that idea, but in real life it sure as hell doesn't happen that way. I live in one of the poorest countries in the EU, comparatively speaking (Romania), and let me tell you that there's no multi-national company that "drains" money into our country based on tax arbitrage the way countries like Luxembourg and Ireland do. Quite the contrary, lots and lots of companies do the exact opposite, i.e. draining money out of Romania to their headquarters in Ireland, Luxembourg and other (much richer than us) countries of Europe.

toyg9• 9 years ago

This allows poorer countries to compete with richer countries

No, that's free movement of labor and goods that does that: you can manufacture in PoorCountry for X rather than the X+Y that would cost in Rich Country, then you can sell competitively in RichCountry for X+Y and bag Y.

What happens to Y after that is another matter entirely.

Keats• 9 years ago

The funny thing is that if you try to do it as a one person or small company, it won't work as your company will be considered a tax resident in the company you live in (as far as I'm aware).

gutnor• 9 years ago

There are plenty of stuff that does not work as a small company.

You know the easy way that large companies balance their cashflow between countries selling IP and stuff. Try that as a small company (eg: make money in the UK, try to hire some guy in Spain to build an app there, i.e. a genuine case of actual workflow issues) and realise that you can only charge for actual service and yes you can in theory have vague service like "consulting" but in reality if the tax office take an interest in your company you are going to be crucified. Cashflow balancing is corporate taxed both ways, better get it right.

dogma11384• 9 years ago

Luxembourg has a 29% corporate tax rate the 4th highest in Europe. This isn't Liechtenstein, Ireland or Estonia... Unlike Ireland Luxembourg also did not hand out tax credits.

Shell paid less than 1 bln US in tax last year in the EU, and less than 5 bln US globally, and overall it's by far much more subsidized than Apple or Amazon, the difference being it's a European corporation.

Most of not all of the largest European corporations excel at Tax avoidance, in fact they are the ones Google, Apple and Amazon learned the tricks of the trade from, heck the EU was just fine establishing tax heavens for their own corporations and canonizing them in EU law as long as they are the ones benefiting from them.

raesene6• 9 years ago

http://www.investopedia.com/ask/answers/100115/why-luxembour... suggests that the basic rate is 21%? and http://www.grantthornton.lu/online/www/navMain/publications/... suggests the rate is currently falling

Also has some other pointers about why Luxembourg is considered a tax haven...

noelwelsh2• 9 years ago

One corporation doing something morally wrong and getting away with it doesn't excuse another company for doing the same. "He did it first" doesn't work on the playground and neither should it work in corporate law.

jpkeisala• 9 years ago

Why do so many companies are there if it is not for taxes?

Every large corporation regardless where they are from are try to get out of paying taxes in EU and it is great they are hunted. Many of them have been under EU tax crackdown and many more are to come.

olau• 9 years ago

Unlike Ireland Luxembourg also did not hand out tax credits.

This seems to be contradicted by the story itself:

"Luxembourg gave illegal tax benefits to Amazon. As a result, almost three-quarters of Amazon's profits were not taxed," Ms Vestager added.

She said Amazon paid four times less tax than other local companies.

taysic4• 9 years ago

'....Luxembourg’s role in orchestrating tax avoidance deals for hundreds of global companies was revealed by the Guardian in 2014, raising questions about tax policy in one of the EU’s oldest member states.

The case continues to hang over Jean-Claude Juncker, the European commission president, who served as Luxembourg’s prime minister from 1995 to 2013, and acted as finance minister for much of that period..... '"

The point is they get backroom deals.

https://www.theguardian.com/business/2014/nov/05/-sp-luxembo...

MR4D• 9 years ago

To me this looks like a corporate shakedown. The EU has some truly dumb laws (as do we here in the US), but punishing companies that folllow the law shouldn’t be the solution. Fixing the law is the only right (and moral) option. Everything else is basically thuggery.

kuschku2• 9 years ago

The EU is based on a legal system that believes that the spirit of the law, if it is obvious, is above the letter of the law (and also it doesn’t have precedents, all courts can reinterpret law again, if you want to change something, you need to rewrite the laws).

As a result, this is completely justified – Amazon and Apple broke the spirit of the law with a technicality.

ams61102• 9 years ago

Exactly. Government sees some successful operation, and sends the tax goons around to make sure they "pay tribute."

cc81• 9 years ago

They are not punishing the companies, they are ordering the countries the follow EU law and that indirectly means that Apple or Amazon for example needs to pay more taxes.

I think it is a pretty reasonable law. EU has a large inner market and the idea behind this law is that corporations should not be able to play countries against each other (i.e. you get a lot of jobs if we don't have to pay corporate tax) and just using tiny countries to get access to the large ones.

So see it as a collective bargaining that is beneficial for EU.

simonebrunozzi• 9 years ago

Not enough.

A 250M fine is almost a joke. Companies like Amazon, Google, Facebook, etc, save Billions of dollars every single year by setting up "creative" tax schemes.

A 250M fine is almost an incentive to keep doing it.

jahnu• 9 years ago

It sets a precedence.

ulfw• 9 years ago

It does indeed. A precedence for trying to pay no taxes and paying just a tiny percentage if one gets caught.

kryptiskt• 9 years ago

The modest size of the fine is probably just because Amazon isn't all that into making profits and thus has little taxable income. Apple had to pay a lot more.

skrause• 9 years ago

This is not a fine, it's back taxes. That's a very big difference.

jlebrech4• 9 years ago

legal tax schemes are legal

singularity2001• 9 years ago

and amoral

Cthulhu_2• 9 years ago

The EU needs to find a balance though - too little and they'll just keep doing it, like what you're saying. Too much though, and a few things will happen:

* They will spend 10+ years in courts to fight it; paying a team of lawyers to fight the ruling or at least postpone having to pay it will be cheaper than paying it. * They'll get out and find a new tax haven.

250 - 500 million seems to be a figure that gets paid eventually (see also EU/RealPlayer vs MS). Higher than that and they'll find a way to not have to pay it and annoy a lot of people - legally.

pbhjpbhj3• 9 years ago

Amazon will leave the EU to find a tax haven? Like stop trading?? Because if they're tradinging here then they've not left the jurisdiction of the EU - we're talking about Amazon, whose zero-hour workers have to be supported by social care, making slightly less profit.

They reportedly paid £15M tax on profit of c.£20 Billion.

plandis5• 9 years ago

They are not being fined. EU decided to retroactively tax Amazon more. Amazon is required to payback the taxi that EU suddenly decided to charge even though Amazon legally worked with a country to come up with that taxing scheme.

easytiger12• 9 years ago

I'm actually quite pro europe, but the insidious influence of the French in particular and, to a geat extent in other ways, the Germans, over their desire for economic imperialistic dominion (now enriched tenfold with GB no longer party to anything going on) is a problem.

Ireland is a very small country with no natural resources. Its way of participating in the EU's drive for growth was the nation's economic policy and its well educated population as a base for American companies to bridge into Europe.

France clearly is bent out of shape because if other EU members can survive without gouging business, citizens et al with incredible levels of punitive taxation, then they can't continue their own shakedown forever without seeing business flight. Sooner or later they will have to relent and reduce their own taxes.

Same with the pursuit of Google, MS, Facebook et al. by Eurocrats with open portfolios.

Its an old fashioned shake down by the biggest self protecting bureaucracy outside of China. In my opinion.

onli4• 9 years ago

I don't think you are aware of just how big the taxcut was Ireland gave to these companies. There is no growth if nothing is earned.

easytiger12• 9 years ago

I'm perfectly aware. No one in the successive Irish governments has done anything other than state they will stand by their current policies. Without them there would be few jobs in Ireland.

jozzz• 9 years ago

Growth is earned by the extra employment in the area, generating income tax and reduced reliance on benefits/public services.

3pt14159• 9 years ago

What?

The internet is global and taxes are local. Why should governments allow a race to the bottom on tax rates?

mcny2• 9 years ago

Exactly! To someone in California, is it any better if jobs move to Texas because of lax employee protection and rock bottom taxes as opposed to the jobs moving to China PR? Why do we allow this race to the bottom?

easytiger12• 9 years ago

There are more variables than tax rate behind business decisions.

eecc• 9 years ago

Nice troll, but this PR piece is a bit too evident, oozes corporate propaganda. Go back to the drawing board and make is subtler

easytiger12• 9 years ago

Nice troll, but this PR piece is a bit too evident, oozes corporate propaganda.

Care to back up your assertions? Or indeed offer anything to the discussion.

CogitoCogito• 9 years ago

The decision seems pretty clear. Why shouldn't Ireland have to abide by the agreements it signed when entering into the EU? If it wants to be able to enter into these agreements it shouldn't have joined. If it considers it extremely important, maybe it should leave.

jamespo• 9 years ago

Because just like other net benefactors from EU money such as Hungary and Poland they want to have their cake and eat it.

oblio3• 9 years ago

I'm pretty sure Ireland can thrive without leeching taxes from the rest of the EU. And regarding no natural resources, I don't think Japan or South Korea or quite a few other developed countries have those either.

easytiger12• 9 years ago

Ireland is around 4 million people and in the 80s was an incredibly poor country with little industry. Now it is building a large services economy and is a business destination. Thanks to the tax policies implemented in the early 1990s. Without those, the jobs and net population decline would have continued faster than it is now.

bobcostas552• 9 years ago

When Caesar divorced Pompeia, he said "my wife ought not even to be under suspicion". As a European I feel the same about the way the EU is plundering US tech companies. Maybe they really broke the law, but you should be above suspicion. When VW has not paid any fines in Europe for the emissions scandal, it's hard not to be suspicious about what's going on.

The Eurostoxx 50 is still below its 2007 peak (and that peak was below the 2000 peak). GDP growth has been pathetic. Almost a decade into the Greek crisis they're still just kicking the can down the road. Is the EU trying to be a productive economic system or a kleptocracy that survives on the scraps it can extract from the Americans? Get your house in order, then maybe these fines would not look as bad.

Oletros2• 9 years ago

Is the EU trying to be a productive economic system or a kleptocracy that survives on the scraps it can extract from the Americans?

Taking into account that Apple and Amazon case (and FIAT in Netherlands) are not fines and don't go to the EU I don't understand how are they scrapping anything

NicoJuicy2• 9 years ago

Plundering US companies? At least back that up with numbers. You mean they pay almost no taxes on their profits in the EU. They are plundering Europe!

Eg. the so called Double Dutch in the past https://en.wikipedia.org/wiki/Double_Irish_arrangement and now this.

By numbers: 15 million pound taxes on 19,5 billion pound revenue

https://www.theguardian.com/technology/2017/aug/10/amazon-uk...

noarchy• 9 years ago

Plundering US companies? At least back that up with numbers. You mean they pay almost no taxes on their profits in the EU. They are plundering Europe!

How can that be defined as "plundering"? Even if these companies didn't pay a single cent in taxes, that would merely mean that the EU government didn't plunder them.

rbehrends6• 9 years ago

This is not how this works at all. The issue at hand is "illegal state aid". Briefly, in the EU, member states may not unfairly favor local businesses by subsidizing them [1]. This includes subsidies via tax breaks that favor some companies over others.

Now, you can have reasonable disagreement about whether those tax breaks are indeed illegal state aid or not (in the case of Apple in Ireland, reasonable arguments have been advanced for both sides). But this is not about plundering US companies: it's about large companies not getting special favors from the state. The tax breaks would not be owed to the EU, but to the member state that gave them the illegal tax break.

The Volkswagen situation is different, as this is not about antitrust law, and the EU has much less power outside antitrust cases [2]. That does not mean that the European Commission hasn't tried to exert political pressure on Volkswagen [3] and the member states [4], but it is bound by the powers granted by the EU treaties.

[1] There are exemptions in the treaties, such as for charities or in response to a crisis or natural disaster. It also only affects state aid that distorts or risks distortion of competition.

[2] European carmakers have been hammered hard in the past for antitrust violations, too, such as: http://europa.eu/rapid/press-release_IP-16-2582_en.htm

[3] http://www.politico.eu/article/how-not-to-lobby-juncker-the-...

[4] https://www.reuters.com/article/us-volkswagen-emissions-eu/e...

bobcostas552• 9 years ago

But this is not about plundering US companies

Starbucks, Apple, Amazon, McDonald's...do you notice a pattern? The suggestion that the Commission is not targeting big US companies is comical (especially in the light of similar actions with other justifications, like the 2.7b fine on Google for their shopping search), as is their interpretation of both tax law and illegal state aid.

The commission doesn't even challenge the transfer pricing laws, they just interpret them differently and based on their interpretation they decide that the tax authorities have granted a selective advantage. The procedure is completely arbitrary as its entire basis is the disagreement between the commission and the tax authorities. Given the complexity of corporate structures and tax law, and the inherent ambiguities of things like transfer pricing, such disagreements can be generated wherever the commission wants to find them. If they wanted to target Chinese companies it would be trivial to conjure up similar issues.

It's particularly ironic that a law against selective treatment of corporations is being used to selectively punish some of them.

plandis5• 9 years ago

Except effectively the EU decided to change how they interpret tax law specifically for Apple and Amazon [1]

[1] https://www.treasury.gov/resource-center/tax-policy/treaties...

ksec• 9 years ago

I have always this question in my mind, If Amazon never made any profits, ( They are ALL invested back to somewhere ), or they decide to borrow $50 Billion, and have any profits left over from investment being paid to the loan's interest.

Basically there are Zero profits.

Why would there be Tax?

It doesn't matter if you are in US, EU, or anywhere else in the world. Surely No Profits = No Collected tax, or am i missing something obvious?

rbehrends6• 9 years ago

That's exactly why the back taxes owed are only €250 million, a pittance compared to Amazon's EU revenue of over €20 billion. Note that Amazon's profits aren't high, but they aren't zero.

_rpd• 9 years ago

Tax law is quite complex. Even for taxes based on profits, it is non-trivial to tie patterns of revenue and expense to particular tax jurisdictions (much less particular geographical locations).

This is particularly true in the age of e-commerce - did the revenue occur where the purchaser clicked an icon, where a server received the buy message, where a server recorded/confirmed the transaction, where a bank sent/received currency, where a warehouse dispatched an item (what if it's a digital item), where the item was received, all of the above, some of the above depending on ever shifting tax law in multiple jurisdictions? There are more and different questions related to expenses. For example, should it have some relationship to where employees are located?

Armies of people work every day to prevent upsetting some tax jurisdiction while minimizing tax expense. It's a sisyphean task. Compared to Amazon's revenues, $250m is a rounding error, so they have very good accountants working for them.

glasz• 9 years ago

eu tax crackdown.

just another smoke screen while "the union" is on fire to keep the sheep calm and comfy on their fucking couch. greece? nobody's talking about that anymore. britain's decision to leave in peace? they're screwing around with that. catalonia? shows you the "values" of this great europe.

votes have shown that people are greatly unhappy and the clowns in brussels have nothing better to do than to pretend a few corporate bucks will benefit the people.

cinquemb• 9 years ago

Well one thing is for certain, it is becoming easier to time shorts on certain European asset classes exposed to these political games…

pwtweet• 9 years ago

I see all the EU state aid and Single Market specialists are on here giving there expert opinions.

Tyrannosaur• 9 years ago

What I don't understand is why Amazon and Apple are getting the punishment. They were abiding by the laws of the country they were in, and now getting punishment. Surely if any party were to be punished it would be the governments of Ireland and Luxembourg which sanctioned these agreements in the first place? It seems that the EU is less interested in law-abiding and more interested in that sweet, sweet U$D. Ex post facto law at its finest.

foepys• 9 years ago

You clearly only read the headline because it fits your agenda. The article clearly states that the EU is ordering Ireland and Luxembourg to tax Apple and Amazon correctly instead of giving them special tax rates.

toyg9• 9 years ago

You clearly only read the headline because it fits your agenda.

Wow, no need for name-calling, dude. Let's keep it civil.

kodablah6• 9 years ago

Did you read the comment you are replying to? Op said "I don't understand is why Amazon and Apple are getting the punishment" and you essentially said "The article clearly states that countries are ordered to enforce the punishment". You are talking past each other. The question is why the companies are being punished and why the states are not, not about the enforcement. What keeps Ireland and Luxembourg from doing this again? If the EU is going to strike down state-mandated tax deals, why not just require the tax deals to have approval from them in the first place?

Stranger433• 9 years ago

Now they weren't just following the laws they were inventing fictional structures where apple for instance kept pretending that its EU profit were in transit to an headquarters where it would be taxable despite the fact that apple did not transfer any of the money from Ireland to any "Headquarters".[https://www.forbes.com/sites/tonybradley/2016/08/30/apples-t...]

Just because you convince a bunch local politicians to look the other way, your still not a law abiding company when your not paying taxes anywhere as even apple aren't allowed to be that stupid about the realities of tax law.

gggdvnkhmbgjvbn• 9 years ago

Sounds fine to me. I dont have much sympathy for the financial plight of apple and amazon.

plandis5• 9 years ago

You're correct. It's a shake down of American companies. The US Treasury released a paper detailing how Apple at least was abiding by all laws and not really doing anything out of the ordinary. I suspect Amazon is in a similar place.

Basically, best case Europe can't be bother to have well written laws and punish the companies arbitrairly. Worst case, this is an attack on US business by foreign governments.

whostolemyhat• 9 years ago

It's a shake-down of companies which have tried to avoid paying taxes.

ionised5• 9 years ago

Those poor poor, US businesses. How they suffer!

Basically, best case Europe can't be bother to have well written laws and punish the companies arbitrairly. Worst case, this is an attack on US business by foreign governments.

This is a blatant dismissal of actual issues because its easier to blame the big bad foreign governments than it is to look at the shitty (and illegal) behaviour of Irish tax authorities and American companies devising shitty tax deals because they believe they are above the law.

These tax arrangements were not legal, they never were. The rules need to be enforced and they will be.

This is not a punishment, it's a correction.

Crying about 'shakedowns' is pointless dishonest. Address the actual issues.

smnrchrds• 9 years ago

Amazon and Apple are not being punished, i.e. they are not fined or sanctioned. They are simply asked to pay the taxes they were legally required to pay.

Ireland gave them a tax deal it did not have the authority to give. So the deal is void and the taxes must be paid. Imagine a mayor in a US city giving a company a deal whereby they don't pay state and federal taxes and only pay a low municipal tax. Do you think IRS would accept this justification from the company and forgives all the taxes they failed to pay?

kodablah6• 9 years ago

Imagine a mayor in a US city giving a company a deal

Happens all the time, cities choose tax rates for themselves, states for themselves, and feds for themselves. The IRS isn't going to come and tell me to pay my city more in property taxes because I got an unfair abatement.

It's seen as punishment by many because when a country tells you what you are required to pay their country, a rational person reads that and sees someone reasonably following the rule. It's not understood by many that a country cannot tax what it wants and that there is a higher power. It's also not understood by many that this higher power is only reactionary and only reacting to the companies and not to the countries.

To use your analogy (flawed, but we'll stick with it), imagine if there were only a dozen or so cities and the mayors kept giving these tax deals on their own city's taxes. Why would the IRS just allow this to keep happening and then only selectively go after certain offenders? If they are in such power over tax regulation, why not require all tax deals go through them since they are the final judge anyways? Why not do anything to crack down on the practice? What stops these regions from offering tax breaks the next time? Heck if I were a company, I'd rather pay later too.

Fnoord9• 9 years ago

Because only American companies are following the construction [1], only American companies are going to get the "punishment" (it isn't a punishment, btw).

[1] https://en.wikipedia.org/wiki/Double_Irish_arrangement#Compa...

vilmosi• 9 years ago

>> It seems that the EU is less interested in law-abiding and more interested in that sweet, sweet U$D.

I don't see how it's fair to take advantage of free access to the EU market and not follow EU law.

It wasn't law abiding and the EU doesn't see a cent of that money, the tax payers do.

Amazon and Apple hit by EU tax crackdown

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