Err, no, not really

The rights SCS owns are licensed to a Luxembourg tax resident company, Amazon EU Sarl. Sarl had a transfer pricing agreement with SCS, approved by Luxembourg, that in effect meant that all the profit flowed back to the SCS and so offshore and so became untaxed. The challenge that the EU will consider today is whether that price from Sarl to SCS was fair. And it is thought they will say it was not and as such Sarl has much more profit and so a tax liability. The likelihood is that Luxembourg will object, just as Ireland is objecting to collecting tax from Apple.

That’s the technicalities. What are the issues? There are several. First, this is a structure created soon after the turn of the century. To be candid, it’s blatant, aggressive and very obviously created with one goal in mind. And back then no one thought anyone would have the temerity to challenge it. Times have changed. I doubt anyone would try a structure quite as blatant as this now. Let’s celebrate progress.

The structure is entirely fine. It’s only the price which is at issue.

22 thoughts on “Err, no, not really”

  1. TMB and the others got there before me.

    SàRL = Société à Responsabilité Limitée = Limited Liability Company.

    That’s a proper ROTFLMAO gaffe. Mr. political economy professor doesn’t know that Sarl means “Ltd.” in French in respect of a company he never hesitates to rag on for its structuring.

  2. No mention of Junker signing all this stuff off when plied with copious quantities of Cognac by the tax directors of these companies, yet still Brexit baaaaad.

  3. Bloke in North Dorset

    Add me to the list of those who wondered what he was on about when he referred to them as Sarl. It was no surprise to realise he was ignorant about the political eceonomy of the country about which he has chosen to lecture.

  4. The main issue as with all these state aid cases involving US MNEs is domestic US tax law coupled with pliant treaty partners and the odd tax haven. Without Juncker presiding over the tax ruling that allowed the profits to be allocated to the non taxable US partners of the SCS Amazon couldn’t achieve the result it has. The transfer pricing point is being argued not because it’s such a large number but because it isn’t taxed by virtue of the arbitrage between US and Lux tax law / entity recognition. Spud glosses over the technical bits and pieces because, well the facts are largely irrelevant to his analysis.

  5. To be fair, I’ve had any number of conversations where group companies are referred to as “Limited”, “Holdings”, “AS”, and so on. In a group context the names tend to be similar, so it’s only the suffix that really distinguishes them.

  6. It’s being presented by twats like Murphy as a tax issue – an evil plan by Amazon – when it’s an EU political issue about state subsidy which could result in the EU telling Amazon to pay tax which Amazon doesn’t want to pay and Luxembourg doesn’t want to collect.

    Another reason to leave the EU.

  7. Ritchie’s latest plan is for Ireland to collect 13beeelion from Apple, and then get the EU to fine Ireland 50% of that for being beastly. Is he on commission or something? I guess he can argue for more funding at least.

  8. @Pellinor – do you think he knows that? And if he does, using that kind of shorthand makes no sense when the 2 entities being discussed are SCS and Amazon EU…

    It’s not like we’re trying to distinguish (for example) Amazon UK Ltd, Amazon NL BV, Amazon EU Sarl, Amazon Italy Spa or whatever.

  9. Crikey – it’s as if the EU seems to think it has a *right* to a slice of dosh, regardless of the arrangements, attitudes of the entities involved and the legality of those arrangements.

    It’s as if there’s a looming black-hole in it’s finances it needs to fill very soon. Or just empire-building.

  10. Well it’s not just transfer pricing. There is the similar but related issue of whether the payment would even be allowed as a bona fide expense (i.e.whether it would be allowed as a domestic payment to a third party).

    Spud’s contention is essentially that the grant of a ruling by the tax authorities confers an unfair tax advantage, which would be a bit of a problem for all the EU companies that have sought rulings and clearances in the past (in Luxembourg, Austria, Netherlands, Belgium and probably many other places).

  11. Bloke in North Dorset


    Are those rulings made public on the point at hand? If so it’s hardly an advantage. If not perhaps Spud has a point?

  12. Pellinor

    To be fair, I’ve had any number of conversations where group companies are referred to as “Limited”, “Holdings”, “AS”, and so on. In a group context the names tend to be similar, so it’s only the suffix that really distinguishes them.

    +1, and not just when names are similar. It’s also a simple way of identifying companies across jurisdictions. For example, by saying “from Sarl to GmbH”, you know that’s “from Lux to Germany”, without having to pendant over (sometimes bongo-ish) local names.

    And Richard knows that. There’s more than enough other stuff he doesn’t.

  13. @BiND: Generally, I think not. In the US they are called private letter rulings. They also have varying degrees of binding effect on the courts. In the past UK courts have been very dismissive of tax payers who produce letters from the Revenue to support their arguments in tax cases.

    The argument against Murphy is that the same ruling is available to any tax payer who presents the same facts, and privacy is quite reasonable when discussing commercial matters with a government agency.

    Tax rulings have been quite often used, and are particularly useful in smaller countries where there is a less developed body of case law because there are fewer cases before the courts.

  14. The funny thing about those tax rulings from Luxembourg is that HMRC would accept a UK company’s involvement in such a structure providing the company could produce a tax ruling from the Luxembourg tax authorities.

  15. All that shyte from the PAC a while back about tax ‘avoidance on an industrial scale’ because of the number of Lux rulings and it was HMRC insisting that UK companies obtained one.

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