This week in tax: Amazon hearing and Amgen lawsuit

The Court of Justice of the EU heard the European Commission’s appeal in its tax dispute with US technology company Amazon yesterday, March 16.

If it loses the case, Amazon may face a bill of back taxes of €250 million ($265 million) to Luxembourg.

The European Commission claims the US company operated a Luxembourg tax structure called ‘Project Goldcrest’. Luxembourg granted Amazon a competitive advantage by allowing it to channel European profits to a holding company that paid no taxes on almost three quarters of those profits, the Commission says.

In return, Amazon invested in Luxembourg, the Commission argues. The company’s legal team disputes the Commission’s characterisation of its Luxembourg tax arrangement as a breach of EU state aid law.

The European General Court ruled against the Commission in 2021.

US pharmaceutical company Amgen failed to notify investors that the group may be hit with a bill of more than $10 billion in back taxes and penalties in a dispute with the Internal Revenue Service (IRS), according to union pension fund Roofers Local No.149.

“Defendants failed to take any meaningful accrual or otherwise reveal the staggering amount of back taxes and penalties claimed by the US government,” said Roofers on Tuesday, March 14.

Roofers alleges that the company’s share price fell by 6.5% on August 4 2021 and 4.3% on April 28 2022. The pension fund argues this is because Amgen did not disclose its potential tax liabilities.

CEO Robert Bradway and CFO Peter Griffith are also defendants in the case. Amgen is reviewing the claims against the company.

Meanwhile, the tax dispute with the IRS that led to the lawsuit is still unresolved. Amgen is facing a $10.7 billion bill in back taxes and penalties in a court battle with the IRS, which claims the company underreported its US taxable income by nearly $24 billion from 2010 to 2015.

Amgen did so, according to the IRS, by allocating profits to a Puerto Rican manufacturing subsidiary. But the company denies any wrongdoing.

The court case is Roofers Local No. 149 Pension Fund v Amgen at the US District Court for the Southern District of New York, No.23-02138.

The Italian government announced its intentions to overhaul the tax system to reduce corporate tax and crack down on tax evasion yesterday, March 16.

Prime Minister Giorgia Meloni wants to overhaul the tax code and implement a new single flat income tax rate and reduce the corporate tax rate from 24% to 15% by 2027. She also wants to close tax loopholes and abolish 600 tax deductions from the system.

The Italian government hopes to crack down on tax evasion and close the so-called tax gap to recoup up to €8 billion ($8.49 billion) more tax revenue in 2024 than the tax authority collected in 2019. However, tax evasion reportedly costs the Italian government an estimated €90 billion a year.

If the reforms go ahead, it would mean the biggest shake-up of the Italian tax system since 1971, when the existing regime was established.

UK legislation to introduce master file and local file requirements as part of country-by-country reporting for large companies will come into force from April 1.

The UK government will also require companies to file a supporting summary audit trail as part of the new CbCR. This is intended to improve the transparency and consistency of transfer pricing documentation and facilitate the UK tax authority’s risk assessment and enquiry process.

HM Revenue and Customs stands to gain more corporate financial information from the filing requirements.

ITR will be following up on its recent coverage of OECD discussions about the two-pillar solution, as well as the UK budget plans to raise corporate tax and implement a 100% ‘full expensing’ regime.

We will also be taking a closer look at updates from the tax authorities in the US and Australia.

Readers can expect these stories and plenty more next week. Don’t miss out on the key developments. Sign up for a free trial to ITR.