Margrethe Vestager, with the powers vested in her by the office of the competition commissioner of Europe, has issued two separate notices regarding the ongoing investigations into the tax avoidance route taken up by Apple Inc. in Ireland and Amazon.com in Luxembourg, referring both the firms to the European Court of Justice.
As per the findings of the investigations being conducted by the European Competition Commission, Ireland has failed to collect a total sum of thirteen billion Euros in back taxes from the iPhone manufacturer (Apple Inc). The sum in today’s currency has a value of around fifteen billion USD. Similarly Luxembourg has, over the years, provided illegal tax benefits to global e-commerce behemoth Amazon Inc. to the tune of two hundred and fifty million Euros.
Amazon, which has its European headquarters in Luxembourg, has managed to get away with not paying a cumulative tax amount of two hundred and ninety four million USD in current currency value.
The European Competition commission considers both these transactions to be illegal under the current tax norms prevalent in the Euro Zone. The commission has taken a never before thought of route to make the countries, wherein the firms are headquartered, recover the said taxes. Till the announcement of the notices today, speculation was rife with reports stating the commission to go behind the member states to recover the unpaid taxes instead of going behind them directly.
Margrethe Vestager, herself taking a cue from the 2016 court ruling against Apple for having gained illegal and unlawful tax benefits in the form of state aid, states that the commission is more than willing to help the member states of Ireland and Luxembourg recover the taxes from the tech firms.
Ireland, in the time since the first ruling against the country, itself has not yet been able to recover even a dollar from Apple Inc. This decision of the commission to fine the firms is to help restore the levels of free competition in the Euro Zone instead of the current preferential treatment on offer. She additionally also states that Luxembourg deliberately overlooked Amazon’s profits while providing the tax breaks.
As per the European legal code, no member state has the authority to grant preferential treatment in the form of selective tax benefits to any multinational having operations in its sovereign territory. Amazon Inc. got away with paying just a quarter of the stipulated legal tax amount to Luxembourg because of such illegal tax benefits.
The primary reason for targeting the countries is because of the nature of the violations. Countries are accused of overlooking this tax evasion in exchange for getting these companies to do business in their territories, because the resulting operations bring jobs and other boosts to the economy.
Indeed, in 2015, Apple announced a huge project to build renewable energy data centers, one of them coming in Ireland just as investigations into the tax situation were intensifying.
Europe is in the midst of reforming its sales tax regulations, to close loopholes of the kind that Apple, Amazon and other tech giants (and other large businesses) have been accused of exploiting.