After Its "Predatory Tax Grab", Europe Prepares Crackdown On Amazon, McDonald's

Tyler Durden's picture

In the aftermath of the EU's latest escalation in its tax war with US multinational corporations, the rebuke from the US was swift, stretching from the US Treasury all the way to Congress: according to Kevin Brady, the House Ways and Means Chairman, the EU Apple decision was  "predatory and naked tax grab." Chuck Schumer, the third-ranking Senate Democrat on the committee, said that the EU is unfairly undermining U.S. companies' ability to compete in Europe.  Naturally, the Treasury also chimed in, and a spokesperson said that "the Commission's actions could threaten to undermine foreign investment, the business climate in Europe, and the important spirit of economic partnership between the U.S. and the EU."

Naturally, the US would confine itself only to heated words: after all, there was little chance Washington would do anything to truly jeopardize trade relations between the two core trading partners, and Europe knows it. 

However, with Europe desperate to boost its dwindling public coffers and only beginning its anti-tax avoidance campaign, AAPL was merely the start in the European Commission's crackdown.  As the WSJ writes, following today's ruling that Apple got an unfair advantage over its competitors because of help it got from Ireland government’s, the EU’s antitrust regulator is likely next to turn to two other ongoing tax investigations on its docket: Amazon.com and McDonald's.

The EU regulator has previously disclosed that it is looking at the arrangements both companies have with tax authorities in Luxembourg. In the case of McDonald’s, the WSJ reports that antitrust commissioner Margrethe Vestager said in 2015 that the investigation concerned a 2009 tax ruling granted to a Luxembourg unit of the restaurant chain, called McDonald’s Europe Franchising, that resulted in the fast-food chain “paying no tax on their European royalties either in Luxembourg or in the U.S.” The unit, which collects royalty fees from McDonald’s franchisees across Europe and Russia, recorded a profit of more than €250 million in 2013 alone, the commission said.

As for Amazon, the tax ruling in question dates back to 2003. It applies to an Amazon subsidiary based in Luxembourg called Amazon EU Sarl. Investigators said in 2014 that “most of Amazon’s European profits” were routed through the unit, but that the structure of the subsidiary made it so that those profits were not taxed in Luxembourg.

We expect Google, which has infamously used the "Dutch sandwich" legal tax evasion scheme for years, will eventually make its way in Europe's crosshairs too.

Vestager on Tuesday gave no concrete timing on when the two investigations would come to a close.

Just like Ireland, Luxembourg has denied giving the companies special treatment, and both Amazon and McDonald’s have said they believe they’ve been paying their European taxes appropriately. However both multinational companies warn in their annual report that they could end up on the hook for more if the investigations don’t go their way.

In addition to US corporations' rising tax problems at the Commission level, companies operating in Europe are also facing increased enforcement efforts at a national level. Authorities in Spain and France recently have raided offices of Google’s parent company, Alphabet, and French authorities have demanded more than €1 billion in back taxes and fines from the company. Alphabet says it’s paid all the taxes it owes.

Considering the deteriorating state of Europe's projected financials, in big part a result of Europe's declining tax base as millions of aging workers are set to retire and instead of contributing will become a drain of government cash, we expect today's dramatic crackdown against Apple to be only the beginning of a long slog which will ultimately hurt Europe itself. Consider that despite its receipt of €13 billion, the biggest loser from today's decision is Ireland itself. As Reuters comments, Dublin already faces a competitive threat from the United Kingdom, which once outside the EU may cut its own corporate tax rate. According to Ireland’s Economic and Social Research Institute, a 1 percentage point cut in the UK corporate tax rate could reduce the probability of non-EU states sending foreign direct investment into Ireland by 4 percent. Irish firms send 44 percent of their exports to the UK, so future trade barriers could mess up Ireland’s economic recovery.

The size of Apple’s potential bill puts Ireland in even more of a corner. While on one hand a 13 billion euro payment would be a windfall for the Irish people, it’s also a big blow to competitiveness if companies fear past dealings could be subject to retrospective meddling. Ireland could simply lower the corporate tax rate across the board. Other countries in the EU with less competitive rates would be among the losers.

To be sure, the full impact of the unwind of Europe's tax policies will take many years; the bigger question is whether, as a result of the ongoing nationalist, refugee and social upheavals, there will even be a Europe in several years.

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Bastiat's picture

Paybacks for VW TDI emissions crackdown?

Looney's picture

 

I think the EU is trying to shake the US down to get better terms for TTIP.

Those penalties/taxes can be appealed or rescinded if they get what they want. I think?   ;-)

Looney

bamawatson's picture

everyone in the room is there to rip-off everyone in the room
no one brought no thing

Troy Ounce's picture

 

 

There goes the TTIP

There goes the neighbourhood.

Ha ha ha

Manthong's picture

If we only had TTIP in force it would be Apple, Amazon and McD’s calling the shots, not those impudent EU government dweebs (and I do mean “EU government dweebs” literally).

Dame Ednas Possum's picture

I can hear echoes of de Gaulle's ghost calling for an end to the US's 'exorbitant privilege'.

Next the EU will ask for the tax to be paid in gold and will send a naval floatilla to collect it. Perhaps Germany can get some more of their phyzz back at the same time?

LowerSlowerDelaware_LSD's picture
LowerSlowerDelaware_LSD (not verified) Dame Ednas Possum Aug 30, 2016 2:03 PM

"Fortunately" for Amazon they NEVER make a profit so have nothing to pay a fine with.  Sorwy...

mtl4's picture

Those tax inversions aren't looking like such a great idea after all, eh?!

Bush Baby's picture

"McDonalds"  - often refered to as the "American Embassy" in Europe.

dark fiber's picture

They better watch it or the US will go to work on DB.  They will definitely not like that.

Arminius Hermann's picture

Possibly rather for the bank's unequal fines?

Haus-Targaryen's picture

I was *JUST* thinking that.  

GM kills people, $130 million fine.  

VW makes cheating cars.  $5 billion fine.

Spot the difference.  

KickIce's picture

For a population control / global warming activist this would make perfect sense.

silverer's picture

Well, Toyota had their turn at getting beat up for some money in the US. Researchers admitted they could never find a defect, but Toyota knew a court case would be a circus, so they decided to just pay up. VW is in the same boat. Yes, I see a real "trade war" of fines coming up between the western nations. The Ponzi must go on.

MANvsMACHINE's picture

McDonalds should pay the back taxes in Big Macs.

ParkAveFlasher's picture

E.29 per Quarter Pounder!  (fx humor)

chrsn's picture

Offer to give manboob surgery to Vestager

niemand's picture

no frankenfood, please. we prefer gold.

Citizen_x's picture

You have to pay royalties for
that quote. It belongs to States
Department's Victoria Nuland.

The central planners's picture

Its now whent the elites begin to bite each other?

junction's picture

"The EC says Apple's Irish arrangements allowed them to pay just 500 euros in tax on every one million euros they made."

If Apple cheated European tax authorities out of $15 billion, imagine how much Steve Jobs' tax dodge cost the paid off IRS. 

Vageling's picture

Yeah... Fuck the EU! Also fuck the US! This is a power struggle that has nuffin to do with the peoples of Europe nor of America. We are both screwed and now these 'elites' are turning on each other. My brother, lets lean back, grab a beer and some popcorn and see the ugly prarasite flees go at each other.

M O B's picture

Why exactly are we fucking the EU? There are legitimate reasons, but this article is not discussing one of them.

While some here on ZH might object to all taxation in principle, let's at least concede that people and corporations do pay taxes and that no one is taking that stance in this particular instance.

Assuming that, is something wrong with Apple, Google, or McDonald's having the same tax rate as their smaller competitors? Apple paid a .0005% tax rate on their EU profits for one of the years in question here. Why should another company have a 25% rate?

No one likes the tax man, but let him fuck over one of the big boys in the name of "fairness" for once.

 

wisehiney's picture

Worldwide fight for crumbs.

King Tut's picture
King Tut (not verified) wisehiney Aug 30, 2016 1:31 PM

ALL taxes are predatory

onewayticket2's picture

small biz owner....I was told by an east coast blue state dept of revenue that even though i have none of the traditional forms of nexus in that state...the fact that a CUSTOMER simply called me from that state and had product delivered to his home creates Nexus.   we have no physical presence, no agents, no nothing....not a single asset or rep or advertisement...nothing...in that state.

 

the states are doing the SAME THING.....

 

silverer's picture

Was it the Gestapo of sales tax collectors, NY? Or competing revenue suckers such as Massachusetts, Connecticut or Rhode Island? Did they cite any specific laws to enforce this?

Bytor325's picture

there was a story in the NJ papers about a tagged great white spending a bunch of time in NJ waters........i figure its only a matter of time before Trenton decides to monitor it and if its here more than 6 months, charge it resident income tax.

Vageling's picture

Crumbs? Always the same with globalization! Everybody wants to lead it! You think we Europeans are stoopid? We figured this out by now. It's why the peoples of Europe just want to live in peace in our sovereign nations. Nobody dictates nobody. Everybody is free to seek their luck within any ally nation. Though we don't tell each other how to run our nations. Then the EU grabbed power with the Lissabon treaty (read EU constitution). Power struggle! Always with imperialistic shit! Everybody wants to be boss over others. Why it's doomed to fail. European history is filled with this knowledge. We had decades of war with each other. Fuck WWI and WWII! That's peanuts. Crumbs as you call it.

Buncha fucking "elites" fighting over the right whose pocket should be linned more. And we care why? War? That's stoopid! Muricans have European ancestors. You build your country. We maintained ours. We learned that multiple countries keeps balance. Every nation should have a say in a union and it should be respected!

Sinking ships on the current path. Fuckers are fighting each other! Good. I won't fight their fight! As that's how they want to use us. And fuck the zionist fuckers who are throwing fuel on the fire!

chrsn's picture

If there's anything worse than bureacrats fucking up your country, it's bureaucrats stealing your money to pay for the fuck-ups.

Rainman's picture

I hear they can relocate to Zimbabwe for a 1% tax rate.

izzee's picture

Well why do you think that the Bezos Post is so Pro Hillary?

 

TTIP TTP TTIP TTP

Mountainview's picture

Irish, forget the past, join Britain.

TheABaum's picture

Somebody has to pay to ethnically cleanse Europe of Europeans. 

Colonel Klink's picture

Soros has been happy to pony up for it.

Youri Carma's picture
What goes around comes around. U.S. does the same to European companies.
WillyGroper's picture

dude looks like a lady.

Panic Mode's picture

Come to the little Britain. We got out just it time for you.

bamawatson's picture

you are NOT out
there will be No Exit

DeathMerchant's picture

Bullshit! This is the death knell for the EU and the beginning of overwhelming success for the UK after Brexit. Guess where these companies will be moving their operations to ??? May has already said that the UK is open for business in response to this.

centerline's picture

lol. The EU can smell the cash in the water. Circling now.

Hulk's picture

Let there be no doubt that the House Ways and Means Chairman is an expert at spotting a predatory and naked  tax grab when he sees one...

LawyerScum's picture

And how many trillions have the Banksters defrauded and stolen? I want off this ride.

August's picture

Thermodynamics says we pay until we die.

Lo siento mucho, mi amigo....

CHoward's picture

You know the U.S. Treasury Department isn't going to take this laying down.  They - the U.S. - wants that money and they'll do what they have to to get their hands on it.