After what has been a year of unbelievable growth for the leading tech companies in the world, the EU just slammed the breaks.
One of the major gripes with companies such as Amazon and Apple has been their ability to avoid lager tax brackets by keeping their assets in tax haven countries such as Luxembourg. Now, however, that decision looks like it may be coming back to haunt them.
(Reuters) – Amazon (AMZN.O) was told on Wednesday to pay about 250 million euros ($295 million) in back taxes to Luxembourg, the latest U.S. tech company to be caught up in a European Union crackdown on unfair tax deals.
While the amount may not be an unreasonable sum, it demonstrates an important shift in the EU’s tolerance towards the tech giants’ tax sheltering.
EU Competition Commissioner Margrethe Vestager, who has other big U.S. tech companies in her sights, has taken a tough line on multinational companies’ approach to tax.
In another related story, Reuters also reports that:
The European Commission…was taking Ireland to the European Court of Justice for its failure to recover up to 13 billion euros ($15.3 billion) of tax due from Apple Inc (AAPL.O), a move labeled as “regrettable” by Dublin.
The moves can have two different effects. The first possibility is that with the whistle finally being blown on tax evasion, the tech giants will be forced to become more accountable going forward. The risks of legal battles and charges of tax evasion are not going to be things that major companies want to go through.
The second possibility is that by calling out these companies and their host nations, the EU may make itself a less attractive target for investment and basing. The bottom line is that if these companies can get away with their tax schemes in other parts of the world, they may do so. While Amazon’s fines look to be relatively low, Apple could be struck with a substantial bill. What reason would they have to stay after the proceedings?
The EU is playing with fire here but it does look like this is a major development in the future of these companies.
Investors should stay informed about the situation, as it could effect stock performance.
To read Reuters’ article on Amazon’s fines, click here.
To read Reuters’ article on the EU’s accusation of Ireland’s failure to sufficiently tax Apple, click here.
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