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EU to order Amazon to pay €400m bill over 'unfair' tax breaks in Luxembourg EU orders Amazon to pay €250m bill over 'unfair' tax breaks in Luxembourg
(about 9 hours later)
EU regulators are expected to order Amazon on Wednesday to pay Luxembourg millions of euros in back taxes, a person familiar with the matter said, the latest global company to be hit by an EU crackdown on unfair tax deals. The European Union has ordered Amazon to pay back about €250m (£221m) in taxes stemming from an unfair tax break the company was given by Luxembourg in 2003.
The European Commission ruling wraps up a three-year long investigation into whether Amazon received an unfair advantage based on a 2003 Luxembourg tax ruling which allows an Amazon subsidiary to pay less tax there than other companies. “Luxembourg gave illegal tax benefits to Amazon. As a result, almost three quarters of Amazon’s profits were not taxed,” European Competition Commissioner Margrethe Vestager said in a statement.
The EU competition enforcer estimated a tax bill of about €400m (£350m) a year ago, two people familiar with the matter had told Reuters at the time. A revised figure is likely to be issued following discussions with other departments in the Commission. "In other words, Amazon was allowed to pay four times less tax than other local companies subject to the same national tax rules. This is illegal under EU state aid rules. Member states cannot give selective tax benefits to multinational groups that are not available to others," she added.
Commission spokesman Ricardo Cardoso and Amazon declined to comment. The bill had been predicted to be as much as €400m and the Commission said the exact amount has yet to be worked out by the Luxembourg authorities.
The Amazon ruling will come on the same day as the Commission unveils changes to the way sales taxes are levied in the European Union with the aim of tackling fraud and curbing companies’ excessive tax-planning. The Commission also announced it would refer Ireland to Europe's top court over its failure to recover up to €13bn (£11.5bn) of tax due from Apple.
The EU competition authority said in 2014 the Amazon subsidiary paid a tax deductible royalty to a Luxembourg-based limited liability partnership which was not subject to the country’s tax regime. It said the royalty was not in line with market rates. The EU competition authority said that an Amazon subsidiary paid inflated royalties to an entity in low-tax Luxembourg. 
Amazon revamped its European tax practices in 2015 so that it can book sales and pay taxes in Britain, Germany, Spain and Italy instead of channeling all sales through Luxembourg where it is headquartered, a move which may raise its tax bill. "The Commission's investigation showed that the level of the royalty payments, endorsed by the tax ruling, was inflated and did not reflect economic reality. On this basis, the Commission concluded that the tax ruling granted a selective economic advantage to Amazon by allowing the group to pay less tax than other companies subject to the same national tax rules," the Commission said in a statement.
Fastfood chain McDonald’s and French energy company Engie are next in the EU crosshairs over their Luxembourg tax deals. Amazon changed its European tax set-up in 2015 so that it accounts for sales and pays taxes in Britain, Germany, Spain and Italy instead of channelling them all through Luxembourg.
IPhone maker Apple has already been ordered to pay back arrears of up to €13bn to Ireland, coffee chain Starbucks up to €30m to the Dutch authorities and a similar amount for Fiat Chrysler to Luxembourg. Amazon will now have to hand over the taxes that should have been to Luxembourg.
At least 35 companies, among them Anheuser-Busch InBev ABI.B, BP (BP.L) and BASF ASFn.DE have been told to pay back taxes of about 700 million euros to Belgium because of their participation in an illegal tax scheme.  McDonald’s and French energy company Engie also face investigations by the Commission over their Luxembourg tax arrangements.
Reuters