Brussels presents one-two tax punch, with the competition commissioner taking on Apple and Amazon after the EU tax chief presents VAT reforms, reports Politico.
Silicon Valley’s tax affairs in Europe will be in the spotlight — again — on Wednesday.
Europe’s competition Chief Margrethe Vestager is expected to order Amazon to pay millions in back taxes to Luxembourg and take Ireland to court over its failure to collect billions of euros from Apple, according to people briefed on the matter.
Not to be outdone, Pierre Moscovici, Europe’s commissioner for taxation, will also unveil an overhaul of Europe’s value-added tax (VAT) system.
The one-two tax punch shows how Brussels wants to wrest the initiative from Paris and other national capitals on the divisive subject of tax reform.
The commissioner for competition is scheduled to announce her verdict directly after Moscovici has presented his VAT reforms, around noon Brussels time, according to two people briefed on the plans. They added that there was a possibility that either of her decisions could be still postponed.
The moves comes after several member countries, led by France, called for an aggressive overhaul of how tech giants pay tax across the region. Many of these plans, which would still need to be approved unanimously by all EU countries, go significantly further than what the Commission has proposed.
Amazon and Luxembourg have long denied any wrongdoing and are likely to appeal.
Just last week, Dublin and Luxembourg threatened to veto a wider EU legislative push to force big tech firms — many of which have their European headquarters in low-tax Ireland — to pay more taxes.
That won’t stop Wednesday’s moves from stoking tensions over tax between the EU and Washington, and aggravating divisions between national capitals.
The U.S. administration lashed out last year after Vestager told Apple to reimburse some €13 billion to Ireland, arguing that the Commission’s tax inquiries were targeting profit that was taxable in the U.S.
Back home, the tech titans are backing efforts for domestic tax reform, specifically proposals to chop the corporate tax rate and to allow them to pay less tax if they bring back home the cash they hold abroad. The issue has taken on greater urgency as foreign regulators start raising questions about companies’ offshore tax strategies, lobbyists said.
The 2016 Apple decision is under appeal by both Dublin and Apple before the EU courts in Luxembourg, as are previous Vestager decisions that target the tax deals between the Netherlands and Starbucks, Luxembourg and Fiat, and Belgium and some 35 multinationals.
Despite those ongoing actions, Vestager is expected to rule Wednesday that a 2003 tax deal between Luxembourg and Amazon, a €460 billion e-commerce and cloud-computing behemoth, breaches EU state aid rules, according to three people briefed on the matter.
The arrangement allegedly enables Amazon, which has its European headquarters in the grand duchy, to shield most of its European profits from corporate tax by allowing it to move certain royalties between subsidiaries, tax free.
Moscovici is expected to propose measures to alter how countries charge value-added tax, in a bid to simplify the system.
The tax bill is predicted to run to several hundreds of millions of euros. Amazon and Luxembourg have long denied any wrongdoing and are likely to appeal, and both declined to comment. The Commission also declined to comment on Wednesday’s announcement.
In 2015, Amazon rejigged its European corporate tax arrangements.
In parallel, Vestager is expected to also announce legal proceedings against Ireland for taking more than a year to collect the €13 billion of taxes owed by Apple, according to two people briefed on the matter. The steps come more than a year after the Commission made its ruling against the tech giant.
The Commission had imposed a January 3 deadline for the sum to be paid, but Dublin is still hunting for investment managers to look after the money pending the appeals.
As part of the VAT overhaul in Europe, Moscovici is expected to propose measures to alter how countries charge value-added tax in a bid to simplify the system and curb cross-border fraud that amounts to billions of euros.