Amazon's tax deal in Luxembourg BROKE the LAW, says EU

Transfer pricing arrangements at crux of matter


Amazon’s sweetheart tax deal with Luxembourg is illegal, according to the European Commission.

The Commission’s preliminary findings indicate that the deal, struck back in 2003, constitutes illegal state aid.

Since then, Amazon has been paying taxes worth only 4-6 per cent of its operating expenses - an arrangement that the Commish says gave the company an unfair advantage.

Amazon has responded by saying it has said received "no special tax treatment from Luxembourg [and] we are "subject to the same tax laws as other companies operating here [in Luxembourg]", as cited by a UK media outlet. El Reg has yet to hear back from Amazon directly.

Last October the Commission opened a similar case against Ireland’s tax arrangements with Apple. However, there are additional concerns with Amazon’s tax dealing as Luxembourgian tax authorities agreed to limit the tax burden no matter what the profits.

At the heart of the matter are transfer pricing arrangements. These are the prices one subsidiary of a corporate group charges another subsidiary of the same group for goods or services.

This practice is used to orchestrate where a group’s taxable profits will sit (usually in the cheapest country), and is allowed under EU law, so long as the internal group prices are in line with market prices.

However, if prices are not, and countries allow such transfer pricing arrangements to let companies pay lower tax, this is deemed illegal state aid.

The Luxembourg decision on how Amazon should be taxed dates back several years and is still in force. However, in Amazon’s case it doesn’t even pay corporation tax, but instead a tax-deductible royalty, which lowers its taxable profits each year.

The Luxembourg Finance Ministry says it is cooperating with the Commission, but denies any wrong-doing. The issue is also embarrassing for Commission President Jean-Claude Juncker, as he was prime minister of the micro-state when the deal was done.

On Wednesday the Greens in the European Parliament gained enough support to launch a probe into the so-called Luxleaks scandal.

If further investigations confirm the suspicions of the Commish, Luxembourg will have to recover the amount deemed to be illegal state aid, which could amount to more than 10 years of unpaid tax. ®


Other stories you might like

  • Twitter founder Dorsey beats hasty retweet from the board
    As shareholders sue the social network amid Elon Musk's takeover scramble

    Twitter has officially entered the post-Dorsey age: its founder and two-time CEO's board term expired Wednesday, marking the first time the social media company hasn't had him around in some capacity.

    Jack Dorsey announced his resignation as Twitter chief exec in November 2021, and passed the baton to Parag Agrawal while remaining on the board. Now that board term has ended, and Dorsey has stepped down as expected. Agrawal has taken Dorsey's board seat; Salesforce co-CEO Bret Taylor has assumed the role of Twitter's board chair. 

    In his resignation announcement, Dorsey – who co-founded and is CEO of Block (formerly Square) – said having founders leading the companies they created can be severely limiting for an organization and can serve as a single point of failure. "I believe it's critical a company can stand on its own, free of its founder's influence or direction," Dorsey said. He didn't respond to a request for further comment today. 

    Continue reading
  • Snowflake stock drops as some top customers cut usage
    You might say its valuation is melting away

    IPO darling Snowflake's share price took a beating in an already bearish market for tech stocks after filing weaker than expected financial guidance amid a slowdown in orders from some of its largest customers.

    For its first quarter of fiscal 2023, ended April 30, Snowflake's revenue grew 85 percent year-on-year to $422.4 million. The company made an operating loss of $188.8 million, albeit down from $205.6 million a year ago.

    Although surpassing revenue expectations, the cloud-based data warehousing business saw its valuation tumble 16 percent in extended trading on Wednesday. Its stock price dived from $133 apiece to $117 in after-hours trading, and today is cruising back at $127. That stumble arrived amid a general tech stock sell-off some observers said was overdue.

    Continue reading
  • Amazon investors nuke proposed ethics overhaul and say yes to $212m CEO pay
    Workplace safety, labor organizing, sustainability and, um, wage 'fairness' all struck down in vote

    Amazon CEO Andy Jassy's first shareholder meeting was a rousing success for Amazon leadership and Jassy's bank account. But for activist investors intent on making Amazon more open and transparent, it was nothing short of a disaster.

    While actual voting results haven't been released yet, Amazon general counsel David Zapolsky told Reuters that stock owners voted down fifteen shareholder resolutions addressing topics including workplace safety, labor organizing, sustainability, and pay fairness. Amazon's board recommended voting no on all of the proposals.

    Jassy and the board scored additional victories in the form of shareholder approval for board appointments, executive compensation and a 20-for-1 stock split. Jassy's executive compensation package, which is tied to Amazon stock price and mostly delivered as stock awards over a multi-year period, was $212 million in 2021. 

    Continue reading
  • Confirmed: Broadcom, VMware agree to $61b merger
    Unless anyone out there can make a better offer. Oh, Elon?

    Broadcom has confirmed it intends to acquire VMware in a deal that looks set to be worth $61 billion, if it goes ahead: the agreement provides for a “go-shop” provision under which the virtualization giant may solicit alternative offers.

    Rumors of the proposed merger emerged earlier this week, amid much speculation, but neither of the companies was prepared to comment on the deal before today, when it was disclosed that the boards of directors of both organizations have unanimously approved the agreement.

    Michael Dell and Silver Lake investors, which own just over half of the outstanding shares in VMware between both, have apparently signed support agreements to vote in favor of the transaction, so long as the VMware board continues to recommend the proposed transaction with chip designer Broadcom.

    Continue reading
  • Perl Steering Council lays out a backwards compatible future for Perl 7
    Sensibly written code only, please. Plus: what all those 'heated discussions' were about

    The much-anticipated Perl 7 continues to twinkle in the distance although the final release of 5.36.0 is "just around the corner", according to the Perl Steering Council.

    Well into its fourth decade, the fortunes of Perl have ebbed and flowed over the years. Things came to a head last year, with the departure of former "pumpking" Sawyer X, following what he described as community "hostility."

    Part of the issue stemmed from the planned version 7 release, a key element of which, according to a post by the steering council "was to significantly reduce the boilerplate needed at the top of your code, by enabling a lot of widely used modules / pragmas."

    Continue reading

Biting the hand that feeds IT © 1998–2022