EU orders Amazon to pay €250M in taxes

On Wednesday, the European Union ordered the world's largest online retailer, Amazon, to pay back about 250 million euros ($294 million) in taxes to Luxembourg. 

The EU said it had been given an unfair tax advantage from 2003.

"Luxembourg gave illegal tax benefits to Amazon. As a result, almost three quarters of Amazon's profits were not taxed," European Competition Commissioner Margrethe Vestager said in a statement.

The 250 million euros is less than an estimate of 400 million that Vestager had calculated at that time. 

However, the Commission added that the exact amount of back-payment would still need to be calculated by Luxembourg authorities.

Amazon is the latest big US multinational company to be reined in by the EU competition regulator, which also told technology group Apple pay back arrears of up to 13 billion euros.

Probe launched three years ago

Launched three years ago, the EU probe into Amazon's deals with Luxembourg was part of several investigations into sweetheart tax arrangements between major companies and several EU countries.

The deals were revealed in the wake of the "Luxleaks" scandal which outlined details of tax breaks given by Luxembourg to dozens of major firms.

Embarrassment for Jean-Claude Juncker

The revelations about the Luxembourg tax deals came as a particular embarrassment for European Commission President Jean-Claude Juncker, who served nearly 19 years as Luxembourg's prime minister, covering the period when the tax deals were made.

The European Commission, the EU's powerful executive arm responsible for policing its competition rules, opened the probe in 2014 in the belief that Luxembourg's tax favours to Amazon constituted state aid.

Accordingly, the arrangement may have given the company an unfair advantage over competitors and would, therefore, be illegal.

But the biggest decision was by far against Apple in Ireland, which shocked Washington. The iPhone maker, as well as Ireland, have appealed the decision.

Once found at fault, a country must recover the amount granted in illegal state aid, potentially a huge amount of money given that some of the tax deals date back many years.