The European Commission is cracking down on countries that fail to collect billions of dollars in taxes from American companies.
The organization, which acts as a watchdog for the European Union, is taking Ireland to court for its failure to collect $15 billion in taxes from Apple and has ordered Luxembourg to recover $294 million in back taxes from Amazon.
The Commission first accused Ireland of being a tax sanctuary for Apple back in 2014 and has been fighting with the country ever since. The agency, in a September 2014 letter, told the Irish government that it was offering Apple illegal state aid, adding that the country’s tax provisions enable the iPhone maker to avoid paying international tax on tens of billions of dollars in revenue.
The Commission issued a formal ruling in August of 2016 that ordered Ireland to collect the $15 billion in back taxes by January of this year. Ireland’s failure to do so has led the Commission to refer the case to the European Court of Justice, European Competition Commissioner Margrethe Vestager said in a statement.
She said Ireland, thus far, is still working on the calculation of the exact amount of the illegal aid granted to Apple with a plan to conclude this work by March 2018 at the earliest.
“We of course understand that recovery in certain cases may be more complex than in others, and we are always ready to assist,” Vestager said. “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.”
The Commission is also accusing Luxembourg of acting as a tax haven for U.S. eCommerce firm Amazon and is ordering the country to recover $294 million in “illegal aid.”
“Luxembourg gave illegal tax benefits to Amazon,” Vestager said. “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. This is illegal under EU State aid rules. Member States cannot give selective tax benefits to multinational groups that are not available to others.”
Following an in-depth investigation launched in October 2014, the Commission found that the country allowed Amazon to shift the huge amounts of its profits from an Amazon group company subject to tax in Luxembourg to a company not subject to tax.
The Commission is ordering Luxembourg to recover the $294 million plus interest.