A Reuters news report said the European Union on Wednesday (Oct. 4) ordered Amazon to pay $295 million in back taxes that it received in the form of illegal tax benefits.
According to a statement from the European Commission’s Commissioner Margrethe Vestager, the company has to pay the amount to Luxembourg, which gave the company illegal benefits that resulted in almost three quarters of its profits not being taxed.
"Amazon was allowed to pay four times less tax than other local companies subject to the same national tax rules,” she said. “This is illegal under EU State aid rules. Member states cannot give selective tax benefits to multinational groups that are not available to others.”
The European Commission said a tax ruling that was in effect in Luxembourg from 2003 until 2011 reduced the taxes Amazon paid without any legitimate reason. An inquiry kicked off in 2014 found the level of royalty payments made from Amazon EU to the holding company Amazon Europe Holding Technologies—which had been endorsed by the tax ruling 16 years ago—was “inflated and did not reflect economic reality.” According to the commission, the holding company is an "empty shell" and "did not, and could not, perform any activities to justify the level of royalty it received."
In response to the fine, the Seattle, Washington online retailer said it doesn’t think it received special treatment and that the taxes were paid in “full accordance” with the tax laws of Luxembourg. It said it is studying the ruling and considering its options, including a potential appeal.
“Our 50,000 employees across Europe remain heads-down focused on serving our customers and the hundreds of thousands of small businesses who work with us," Amazon said in a statement to CNBC. Meanwhile, Reuters reported that the amount the company is being fined is significantly less than what sources said Vestager was looking to fine the online retailing giant last year.