04/10/2017 11:32 BST | Updated 04/10/2017 14:28 BST

Amazon Ordered To Pay £221m In Taxes To Luxembourg By EU

Almost three quarters of Amazon’s profits were not taxed.

Amazon has been ordered to repay €250 million (£221 million) in back taxes after the European Union said the world’s largest online retailer had been given an unfair tax advantage for years.

The European Commission said three quarters of the profits Amazon made from sales in the EU had not been taxed. 

Francois Lenoir / Reuters
European Competition Commissioner Margrethe Vestager holds a news conference at the EU Commission's headquarters in Brussels, Belgium.

Margrethe Vestager, European Competition Commissioner, said the tax benefits Amazon received in Luxembourg were “illegal under EU state aid rules”.

This latest blow for Amazon comes days after HuffPost UK revealed that staff at a “flagship” Amazon site in the UK are taking home less than the minimum wage after being effectively forced to pay a third-party for an “unaffordable” special bus service.

In Luxembourg, Amazon has been receiving a tax advantage since 2003.

“Luxembourg gave illegal tax benefits to Amazon. As a result, almost three quarters of Amazon’s profits were not taxed,” Vestager added in a statement.

The €250 million is less than an estimate of €400 million which sources told Reuters last year that Vestager had calculated the company owed.

But the Commission said that the exact amount of back-payment would need to be calculated by Luxembourg authorities.

The Commission said Luxembourg allowed Amazon to channel a significant portion of its profits to a holding company without paying tax.

The holding company was allowed to do this because it held certain intellectual property rights.

“The Commission’s investigation showed that the level of the royalty payments, endorsed by the tax ruling, was inflated and did not reflect economic reality,” the Commission said in a statement.

The holding company in Luxembourg was described by Vestager as an “empty shell” and was designed to slash the company’s tax bill. 

Vestager said that local companies in Luxembourg would have had to pay four times as much tax as Amazon on the same profits.

Amazon said it was considering an appeal over the payment and Luxembourg rejected the finding and said it was looking at its legal options.

Amazon, which employs 1,500 in the grand duchy, is one of the biggest employers in the country of half a million people. It has a Europe-wide staff of around 50,000.

“We believe that Amazon did not receive any special treatment from Luxembourg and that we paid tax in full accordance with both Luxembourg and international tax law,” Amazon said in a statement after the announcement.

In 2016, Amazon made a $2.4 billion profit on global revenues of $136 billion.

In a separate move, the commission is taking Ireland to the European Court of Justice for failing to collect taxes amounting to $13 billion from US technology giant Apple. 

The Commission ordered Apple in August last year to pay the hefty tax bill after it ruled the firm had received illegal state aid.

“More than one year after the Commission adopted this decision, Ireland has still not recovered the money,” Vestager said, adding that Dublin had not even sought a portion of the sum.

“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,” she added.

The Commission said the deadline for Ireland to implement its decision was January 3 this year and that, until the aid was recovered, the company continued to benefit from an illegal advantage. Apple is appealing the case.