Amazon is, as predicted this morning, facing a tax charge of about €250 million that the European Commission is demanding be imposed upon it by Luxembourg as a result of that country having provided it with illegal state aid.
The press have asked me for comment on this story. I said this:
The message in this claim is unambiguous. It is that Luxembourg deliberately provided a tax ruling to Amazon that had no commercial substance and which conferred upon it an unfair tax advantage that has altered the market competitiveness of other companies. The Commissioner is clear that this is unacceptable. When the EU is built on the principle of fair competition her logic appears to be unassailable. So to does the evidence that Amazon adopted a structure that was designed, by exploiting Luxembourg law and practice, to achieve this result appear unassailable to me.
Is the Commissioner skating on thin ice though when all the tax dimensions of this case have still to be resolved? I suggest not. Tax disputes may take years to resolve. The impact of unfair competition is seen considerably more quickly. The impact of a tax structure can be real, and detrimental to fair competition irrespective of the technical legality of a tax scheme: it is not true that because a tax scheme is legal it is beneficial to society or fair markets. There is then an over-arching imperative for the Commissioner to act to protect markets. In this case the real question is why it took so long for this case to be brought. The only answer to that is that opacity prevented attention being drawn to it. This is what tax transparency is now so vital. Fair competition absolutely depends on it.
I wonder if all those who praise 'free' markets will be queuing to praise the Commission this morning? They should be. But I expect a deafening silence.
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“Deafening” in Manchester.
So where do you stand on state aid as a matter of principle?
Should the state be able to aid selected private businesses nor not? Would you have a different view if Lux here (or Ireland on the Apple case) if they had given a straight out subsidy, if, say, jobs were threatened?
I would have thought an a pro-state person like yourself would be on the side of more state aid rather than less.
I am wholly in favour of state aid
But it has to be accountable, transparent and openly won
This case involved none of those things
There must be level playing fields
Thanks.
I’m assuming the ‘openly won’ criterion you refer to is reference to open grant programmes where all comers are invited to apply and get the grant if they meet published criteria.
Have I understood you correctly that you oppose state aid to selected organisations with no application process open to all? This may involve subsidies to a particular company to save it in financial difficulties, to save or increase jobs, to encourage it to set up a plant in a particular place, or whatever. This is almost never ‘openly won’.
You may assume nothing
Your suggestion is ridiculous and you know it. Of course there are valid reasons to provide emergency support to strategic businesses, at least in the short term. You are pretending otherwise for the sake of point scoring.
That said, what I am making clear is that these deals have to be transparent. The likes of deals with Nissan done by this government are not acceptable.
These deals for rescuing ‘strategic’ businesses are almost never transparent.
Who gets saved and who doesn’t is a murky world.
I’ve worked on a few from the perspective of local authorities. Those involving local professional sports teams come to mind. They are very hush-hush and it depends a lot on who you know.
So you agree with me that there is a need for reform?
State aid wins my prize for the worst law.
If you like state aid, do lots of it. Not my opinion, but hey ho, whatever. Main reason JC wants out of the EU – to get heavily into state aid.
If you hate state aid, do none of it.
But we currently have a mish-mash of complex rules. Effectively state aid is illegal unless you hire a smart lawyer to find loopholes, or if you are smart and gutsy enough to get away with it.
And remember – it only binds the state, not corporations or ordinary people.
So you’re saying the state should have no role
It’s the same as saying ‘unless you’re rich you’re on your own’
In fact, you’re saying what that letter did behind May, ‘F off’
The way that Bermuda supports reinsurers sounds similar to what you suggest – a level playing field that is open to all. It can be done
Pure drivel, with respect
Show me all their accounts
If you can’t the conditions for a market don’t exist
In distorting markets by helping some participants selectively, no, I think the state should stay out of it.
When politicians/public servants get to decide who gets saved/helped and who doesn’t, the back scratching starts and the country soon goes to the dogs.
At the heart of the problem is that politicians and public servants find it hard to distinguish between a factory that needs saving from closure and a football team that needs saving from relegation. They’re all worthy.
Have you worked in the public sector (and I don’t mean as a professor but involved in dealing with public money and public services)? If so, I’m slightly surprised you haven’t seen this yourself.
You mean yptacvgabens don’t distort selectively?
Nor monopolies?
And unequal access to capital does not?
For heaven’s sake look reality in the eye and stop talking utter public choice theory nonsense
I’m not saying the state shouldn’t intervene in markets at all.
I’m saying they shouldn’t do so by selectively helping one participant over all others within a commercial (as distinct from, say, a charitable) sphere. Who gets helped? Who doesn’t? It gets murky, and I’m surprised you think it might be a good idea.
That’s the state aid issue – and one of the 4 boxes that you have to tick before state aid even applies (under EU law).
If the state provides assistance that helps all participants equally (eg by policing monopolistic behaviour), that’s not state aid under EU law.
So you prefer a scatter gun approach that could waste vast sums of public money?
Why?
Isn’t infrastructure spending (eg roads) ‘scattergun’ spending? I’m assuming this expression means it benefits everyone generally and not one person specifically and exclusively. I assume you don’t regard that as a waste of money??
Do you really not see how helping one selectively to the disadvantage of others in a commercial market is a recipe for corruption? Who is to say the one helped provides the community (customers?) with better value than the one not helped?
And you might say ‘what about ‘strategic’ industries’?
OK, there are some obvious examples like food and energy.
But what about things like professional football? My experience is in local government, including cities with famous teams and cities with once-famous teams now in decline. Elected members get in a lather if the status of the local team is under threat. Part of the fabric of the town etc. Whether you regard professional football as a strategic industry is a matter of opinion.
I am getting bored with the crassness of your commen
Do you really think roads are scattergun? That could only be true if they ran from nowhere to nowhere. But that’s not how they work. They run from place to place, paid for as essential underpinning of society and so business.
So the soend is designed to meet need
State aid can do the same thing
I think your time here is up: your opinions are a waste of my readers’ time
Likewise when is the WTO ( the darling of extreme right-wing Tories) going to act to punish countries that deliberately rig their currencies to capture price point in global marketplaces?
Interesting point Schofield,
There are some who have said that such things can’t be done because it might trigger a collapse in China and from there global crisis. So the idea there is that they are too big to fail and too big to stop currency manipulation in the short (?) run.
https://www.theguardian.com/commentisfree/cifamerica/2010/aug/02/china
That sort of talk has further inspired Trump and co. to call them out but then again his hypocrisy is such that it doesn’t require explanation.
Of course there are others that would argue that Germany’s place, role and conduct as a Eurozone member is an example of grand currency manipulation but that wouldn’t fall within the WTO’s remit would it?
http://www.telegraph.co.uk/finance/economics/10758577/Germany-risks-EU-fines-with-record-current-account-surplus.html
I am not sure what you are driving at. I haven’t seen the accounts of all the participants in the local farmers’ market but it seems to exist. The prices for carrots seem comparable to the supermarket across the road. The chutneys are more expensive than Branston but the range of flavours is much wider. It seems to be an example of a free and fair market
You know exactly what I am talking about
And if those traders have limited liability in the UK then you can see their accounts
And that’s because information is the basis of fair markets – you need to read some basic economics
If a trader has limited liability and submits abbreviated or even micro accounts i am not sure I can tell anything from their accounts. There is no p&l.
And they could be showing information at least 9 months and possibly 21 months old.
I would like to know how this sparse and old information helps in the situation Graeme outlines.
Could you expand a little on your answer?
It is always so interesting reading your replies.
You know the risk of trading: that is the point of capital and reserves.
And you can appraise leverage, which is a measure of risk.
You cannot do that without accounts
And reinsurers are not micro entities