Leonid Bershidsky, Columnist

The EU Is Pulling Its Punches Against Tech Giants

The tax cases against Amazon, Apple and Google rest on a teetering foundation.

Business as usual.

Photographer: Leon Neal/AFP/Getty Images
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Margrethe Vestager, the European commissioner for competition, is again picking low-hanging fruit by ordering Amazon to pay 250 million euros ($294 million) plus interest to Luxembourg, deemed to have rendered illegal state aid to the U.S. company. But the European Commission should be aiming higher if they want to send a serious message to U.S. tech giants about doing business there.

The scheme Vestager attacked in Amazon's case turned on the tax ruling Luxembourg granted the retailer in 2003 and maintained until 2014. The ruling, according to the Commission, allowed the company to transfer 90 percent of its European operating profit as royalties for the use of intellectual property held by a Luxembourg partnership that was exempt from corporate tax. The U.S. owners of the partnership then simply deferred their tax liability. The commission said the amount Amazon paid to the partnership was 50 percent higher than necessary under the partnership's cost-sharing arrangement with the U.S. parent company, under which Amazon financed its research and development.