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Amazon is likely to appeal an EU ruling that it must pay a €250 million tax bill, analysts have predicted.
The online retailer is expected to be hit with the tax bill today after a lengthy investigation into a deal with Luxembourg, where its European operations are based.
Margrethe Vestager, the EU’s competition commissioner, ruled that the company’s tax affairs failed to comply with state aid rules. After a three-year investigation, Vestager ordered it to pay back €250 million in taxes to Luxembourg.
“Amazon will almost certainly appeal the EU’s decision and we will likely see a significant reduction to the amount ultimately due,” said Miles Dean, the co-founder of Milestone, a London tax law consultancy.
Experts pointed out that US multinational corporations benefited significantly from so-called sweetheart tax deals doled out by countries such as Luxembourg, the Netherlands and Ireland.
“The real issue is the tax arbitrage created by different tax systems clashing and the use of hybrid entities,” Dean said. “Given that there appears to be very little political will in the US to amend its tax laws that give rise to the offshoring of profits, the state aid proceedings have the potential to trigger a tit-for-tat trade war with the US.”
Tim Wach, the managing director of Taxand, another tax law consultancy, said: “The decision will create greater instability and no doubt increase the cost of doing business in the EU as it undermines the reliability of all interactions between taxpayers and tax authorities including, potentially, all tax rulings, advanced pricing agreements or settlements of tax assessments and other tax disputes.
“The European Commission may have good intentions towards creating a more level playing field, but the turmoil and confusion that arises from this ruling is not conducive to improving business and investment confidence at a time when corporates are facing many challenges across their markets.”
The Amazon ruling coincided an announcement yesterday that the European Commission will take Ireland to court in an attempt to recover €13 billion in allegedly illegal tax benefits from Apple.
More than a year ago, the commission ruled that the US technology company’s tax arrangements in Ireland provided it with an illegal commercial advantage. Brussels ordered Dublin to recover the cash but is still waiting for it to do so.
Dean commented: “Like it or not, Ireland has to play by the rules it has signed up to. As one of the member states that has benefitted greatly through its membership of the EU, it can’t shirk its obligations when called upon to enforce the rules of its ruling body.”