The European Commission under Competition Commissioner Margrethe Vestager definitely means business. Today it issued not one but two notices related to ongoing investigations of tech giants Apple and Amazon and how they are not paying what is due in taxes. The result is a doozy. The EC says that Ireland has failed to collect up to €13 billion in taxes from iphone maker Apple -- roughly $15 billion in today's currency. And Luxembourg gave e-commerce giant Amazon (which bases its European HQ there) illegal tax benefits worth €250 million -- or $294 million in today's currency.
Going after the Member States -- and not the companies themselves -- is an interesting move that was widely reported to be in the works leading up to today -- and has been an ongoing issue for years at this point. Indeed some of that is reflected in Vestager's official statements on the situation.
"Ireland has to recover up to 13 billion euros in illegal State aid from Apple," she said, referring to this 2016 ruling on the tax issue for the most valuable tech company in the world. "However, more than one year after the Commission adopted this decision, Ireland has still not recovered the money, also not in part. We of course understand that recovery in certain cases may be more complex than in others, and we are always ready to assist. But Member States need to make sufficient progress to restore competition. That is why we have today decided to refer Ireland to the EU Court for failing to implement our decision."
And on Luxembourg/Amazon, the tax breaks that the country gave to Amazon were overlooking the company's profits, she noted.
"Luxembourg gave illegal tax benefits to Amazon. As a result, almost three quarters of Amazon's profits were not taxed. In other words, Amazon was allowed to pay four times less tax than other local companies subject to the same national tax rules," she said in a statement. "This is illegal under EU State aid rules. Member States cannot give selective tax benefits to multinational groups that are not available to others."
Part of the reason for hitting the countries is because of the nature of the violations. Countries are accused of overlooking some of 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 -- timed (coincidentally!) just as investigations into the tax situation were intensifying.
We are reaching out to both Amazon and Apple, as well as the tax authorities of both countries, for comment. Although it is the states that are getting hit with the bills, the idea is that it will put pressure on these companies as well, so they will likely still continue to play a role in how this gets defended and negotiated.
More to come. Refresh for updates.