Luxembourg challenges EU order to recover tax from Amazon

https://www.reuters.com/article/us-eu-amazon-luxembourg-taxavoidance/luxembourg-challenges-eu-order-to-recover-tax-from-amazon-idUSKBN1E917S

by mgiannopoulos • 9 years ago

106 78 9 years ago

reuters.com

tomcooks• 9 years ago

Half of which belongs to Italy[0], considering they evaded taxes for years.

[0](https://www.wired.it/economia/business/2017/12/15/amazon-acc...)

riffraff2• 9 years ago

That is unrelated, the things contested to Luxemburg is that there was a special agreement in place for Amazon, which is forbidden by EU regulations.

The thing contested from the Italian tax office is actual tax evasion.

Edit: to clarify, I mean that Luxemburg can have had illicit behaviour independently from Amazon acting legally in Italy (which in theory they did since 2015).

wiz21c• 9 years ago

JC Junker, current President of the Commission, was also Prime Minister of Luxembourg just before... Is it me or does it sound just awful ?

jimnotgym3• 9 years ago

It is becoming clear that the UK has a deal with big US tech too. https://waitingfortax.com/2017/06/30/uber-a-new-front/

jorvi• 9 years ago

Wouldn't it be much simpler to just require companies to pay taxes in the country their product or service is sold, as a percentage of said product or service? Basically a super sales tax.

Right now Italy feels like Luxembourg stole it taxes and meanwhile the US feels like those taxes are actually really theirs since its an US company.

For me at least, I feel like this: an iPhone, imported by an Italian company (or subsidiary), sold by an Italian dude working in an Italian mobile phone shop, to an Italian who pays with a €700 transfer from his Italian bank account to the shops' Italian bank account.. the taxes for that should fully go to Italy. Why shouldn't it, except for the fiscal advantages of global companies?

UncleEntity2• 9 years ago

Isn't that what the VAT is for?

Honestly asking because US states fall all over themselves to give tax breaks to companies all the time. Hell, even individual cities compete with each other using tax breaks to attract employers.

I couldn't even imagine the federal government stepping in and forcing a state to collect more in taxes "to encourage competition".

vidarh3• 9 years ago

That's largely how VAT (value added tax) works in theory: A company collects VAT on what they sell, and counter that with VAT on what they buy, so that they effectively pay a tax on the "value added".

The problem with all of these things is that when you can pick and choose jurisdictions, then playing them up against each other becomes easy: Sell said phone for 690 from a low tax jurisdiction to the Italian company, and the "value added" on that 700 sale is 10.

This is one of the tricks they also use to avoid income taxes: Shift the revenue to a low tax country by applying trickery in terms of how subsidiaries shift products and revenue between themselves.

But this example also shows why you can't just tax people on the total value rather than the added value unless the tax is set very low:

For the majority of companies that don't control the whole value chain, the margin between the import price and the price the product is sold on to retailers at might very well genuinely be <10%. Any such tax on the total retail value that makes a dent in the Apple's of the world is likely to bankrupt large numbers of local companies.

If you were to apply such a tax at every step in the value chain, it'd very quickly become a big problem.

And while it might seem "easy" to instead e.g. put such a tax only on final products sold to end users in some product categories, it'd lead to a massive complexity in trying to create rules that are not trivially easy to evade with small changes to the way the products are sold.

In other words: The idea is good, but creating rules that are possible to enforce and not full of loopholes is where these thins tends to fall apart.

interdrift• 9 years ago

Someone should just step up and review all of this mess.

expertentipp• 9 years ago

As an individual person without an army of lawyers and accountants try having EUR 1000 of unregulated taxes and you'll stir the wrath of the Olympus.

lumberjack3• 9 years ago

Plus corporate taxes are already very low. The highest nominal tax rates in Europe are around 30%, but that is misleading. The actual real tax rates are somewhere from 5% to 10%, because every country has these "ifs and buts" clauses, that they use to lower corporate taxes, and effective act as a tax haven, while pretending they are not.

Coincidentally, I just checked this statistic on OECD: corporate tax revenue is just around 4% to 8% of total tax revenue. I wonder where these corporations would be if the normal people weren't contributing ~90% of tax revenue for upkeep of state infrastructure, that enables the existence of these businesses in the first place.

https://data.oecd.org/tax/tax-on-corporate-profits.htm

pendar747• 9 years ago

That's true, but it's worth mentioning that income tax also doesn't seem to be a large portion of most country's GDP. It seems to range between 1% to 14%, except Denmark (25%) which is an outlier. See: https://data.oecd.org/tax/tax-on-personal-income.htm#indicat.... The global average is only 8%!

Another interesting fact is that in the graph for corporate profit, Luxembourg actually has the highest rates, which must be because of its small size and huge number of companies that are registered there to benefit from the countries low tax rate.

Despite this I think corporate should be higher judging how much large multinationals earn. Otherwise the income inequality is only going to grow further.

Silhouette• 9 years ago

The highest nominal tax rates in Europe are around 30%, but that is misleading. The actual real tax rates are somewhere from 5% to 10%, because every country has these "ifs and buts" clauses, that they use to lower corporate taxes, and effective act as a tax haven, while pretending they are not.

Where do I sign up for those? Because my small businesses all pay the UK's published corporation tax rate of 19%, and the shareholders now get hit with a further dividend tax on the remainder.

jimnotgym3• 9 years ago

I got one am very pleased to see the EU doing good work against tax havens. It's no wonder the British press hate the EU so much... the proprietors, in general, have an interesting record when it comes to paying tax

Brotkrumen• 9 years ago

The british press hates other tax havens because they themselves try to be one. There are tons of PLCs established just for tax purposes.

adventured• 9 years ago

It's certainly a competition. It's why Ireland (12.5%) and the UK (19%; 17% in 2020) have two of the lowest corporate income tax rates on the planet. It worked extremely well for Ireland, I've seen little evidence that it has worked for the UK so far. The UK's economy is net the same size it was in 2005, before adjusting for inflation, despite growing their population by about 10%. Ireland's economy by contrast is nearly 50% larger than it was in 2005.

NotSammyHagar2• 9 years ago

But this race to the bottom for tax rates is clearly bad. Luxembourg could next make their rate 1%. Then Eire could come back with 0.5%. There's no good that comes of this - even the countries with the low rates are hurting their ability to raise enough money from tax. It only works in the short term when you have companies that cheat and book revenue from outside into that country. It's wrong and I would strongly support both (1) trying to stop the low rates, and (2) book money in other countries than you earn it. It's all just a bs tax dodge.

SamReidHughes• 9 years ago

The EU governments could just stop taxing corporate income entirely, and only tax personal income, sales, and property. There's no reason in principle why corporations must be income taxed.

qubex3• 9 years ago

Fun fact: Luxembourg's biggest physical export is dentures. Yup.

woodpanel5• 9 years ago

To add context to the article: The EU "doing good work" as you say is not the news here. The real news here is that one of the EU's core but minor member states is attempting to refuse that "good work".

It shows how fragile the EU has become. Pushing the envelope for their own gains at the cost of delegitimizing EU institutions has become a sport among EU nations. But Luxemburg best exemplifies those countries that seemed immune to this, because Luxemburg best exemplifies a nation that would lose everything if the EU disintegrates. Even they are now doing it

alexasmyths3• 9 years ago

"Pushing the envelope for their own gains at the cost of delegitimizing EU institutions"

Why does the EU exist, if not 'for the gain of the member states'?

Do you see the psychological paradox of Federalization?

A better argument is that if there is such contention, then maybe some of those EU level institutions should not exist.

And remember, the head of the commission is JC Junker, the very architect of Luxembourgs special tax schemes.

The job of the EU+Lux is to make the tax laws clear, not screw things up for business who by and large - just pay the taxes they are owed, but at the minimum possible rate.

alexasmyths3• 9 years ago

"I got one am very pleased to see the EU doing good work against tax havens. It's no wonder the British press hate the EU so much."

Oh please!

Jean-Claude Junker - the #1 man in the EU - was the architect of Luxembourg's tax-avoidance schemes.

Your statement very difficult to comprehend.

The UK is a regular taxed entity. It is NOT a haven really in any way.

Meanwhile: Luxembourg, Monaco, Lichenstein, Isle of Man and a few others are broadly tax havens, and Ireland is a huge haven in specific corporate circumstances.

Not only is the EU rife with tax havens - but they are also duplicitous in their application of the law.

The EU's grab of billions from Amazon, Google and Apple is theft of private property.

The EU is acting like Venzuela or a banana republic.

Re-interpreting the law retrocatively 25 years???

These 'big corps' will do everything possible within the law to lower their taxes - but they obey the law and pay their taxes.

If the EU, in 1980 had said 'here are the rules' - then big corps would comply.

But the EU deciding one day that 'oh, this tax law, which we have actively accepted for 25 years as meaning 'this' - now means 'that'. Retroactively.

This is what tin-pot dictators like Putin do when they wish to nationalize specific industries - and it's scary to any business person and bad for business.

The EU's job should be to make sure there is relative tax harmony, that the rules are clear, and then that people follow those rules.

Not to change them willy nilly and grab billions because of socialist populist sentiment.

If they want to change how things are - change the tax laws. that's it.

riffraff2• 9 years ago

the EU is not changing any rule, they are enforcing one of the original ones: a state must not make special cases for companies.

The principle is fundamental because otherwise everybody would play favourites with their own "national champions".

The case against Luxembourg is not that taxes there are low, it's that they are low _for amazon_.

What Luxembourg says is not "this is a new rule" but "we have not played favourites".

nradov2• 9 years ago

Eliminate corporate income taxes, and make the change revenue neutral by raising taxes on individual corporate investors and high-income employees. The money eventually flows to them anyway. By eliminating corporate income tax we could cut out all the waste and non-productive tax avoidance financial engineering. We wouldn't need corporate tax accountants at all. This would boost growth rates and economic efficiency.

oakesm9• 9 years ago

Wouldn't those high income employees just become tax exiles and move away? That's what happens with athletes like Lewis Hamilton living in Monaco.

nradov2• 9 years ago

It doesn't matter where they live. Foreign investors can still be required to pay income and capital gains taxes on money earned in a particular country. The government can always block or seize international payments to tax evaders.

In theory the countries where Lewis Hamilton races and earns his income could tax him there. But generally they let him slip through loopholes to maintain good relations with F1.

Luxembourg challenges EU order to recover tax from Amazon

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