Are you avoiding tax, big tech firm? Not any more you won't, growl MEPs

MEPs in Strasbourg will tonight discuss how to stop the likes of Amazon and Apple from making deals with governments in order to pay next-to-no tax.

The special committee on tax rulings was set up after the “Luxleaks” scandal exposed the scale of tax avoidance schemes carried out by big biz. The draft resolution calls on EU heads of state and governments “to make clear political commitments to take urgent action to tackle this situation, which can no longer be tolerated, not least because of its impact on national budgets.”

MEPs want more effective political scrutiny and better co-operation between national parliaments.

Apple and Amazon are in the crosshairs because they are two of the very few cases to be investigated by the European Commission; there have been just 65 tax-related state aid cases since 1991. The EU competition watchdog has taken a magnifying glass to the amount of tax paid by Apple in Ireland, with the crux of the matter being whether the tax agreements constitute illegal state aid.

According to the Commission: “Tax rulings may involve state aid within the meaning of EU rules if they are used to provide selective advantages to a specific company or group of companies.”

Ireland's finance minister, Michael Noonan, denies arranging any illegal deals, despite Apple paying an effective tax rate of just two per cent between 1991 and 2007. It managed this through so-called transfer pricing arrangements. These are the prices charged by one part of a group to another part of the same group in order to shift the taxable profit between subsidiaries from a country with high taxation to one with lower taxation.

The fruity firm could end up paying €17bn in back taxes if Competition Commissioner Margrethe Vestager finds there was wrongdoing going on. A preliminary investigation in the Amazon case has already found evidence of illegal state aid.

Vestager has already missed her self-imposed deadline to complete the investigations by the middle of the year, but a ruling is expected soon after added pressure from the European Parliament. The commission does not comment on ongoing cases and Apple and Amazon had not responded to requests for comment at time of publication.

According to the parliamentary committee’s draft resolution, “tax avoidance by some MNCs [multinational corporations] can result in close-to-zero effective tax rates”, meaning that these companies “do not pay their fair share.”

The committee has already invited Google’s Eric Schmidt and Facebook’s Mark Zuckerberg to the headmaster’s office parliament to explain themselves. Both declined. Xavier Garambois, general director of Amazon Europe, also sent his apologies “due to the ongoing investigation” by the European Commission.

The EU parliament will vote on the resolution next month and is likely to call on member states to adopt new laws for the mandatory automatic exchange of taxation information between countries by the end of the year. ®