EU Commissioner of Competition Margrethe Vestager | John Thys/AFP via Getty Images Commission ratchets up pressure in digital tax fight If EU countries are not ready to play ball with proposed tax reforms, European competition authorities are willing to do it the hard way.

Margrethe Vestager just waded into an increasingly divisive standoff over how some of the world's largest companies pay tax in Europe.

Europe's competition chief demanded Wednesday that Amazon repay €250 million in back taxes to Luxembourg and announced that the European Commission will take Ireland to court for failing to collect €13 billion in allegedly unpaid taxes from Apple.

Vestager's twin legal actions come amid hardening divisions between European countries over how these digital giants — whose EU revenues are often booked in low-tax countries like Ireland — pay into national coffers at a time when Europe is still recovering from a decade of sluggish economic growth following the financial crisis. Her decrees ratchet up the pressure on the main opponents to tax reform, laying bare how some companies have taken advantage of differences in Europe's national tax laws.

The message has become ever more clear: If EU countries are not ready to play ball with proposed tax reforms, European competition authorities are willing to do it the hard way, using the Commission’s technical rules to force companies to pay more tax when it’s difficult, if not impossible, to find unanimity at the EU level for major tax overhauls.

"I hope both decisions are seen as a message," Vestager told reporters Wednesday. "That all companies must pay their fair share of taxes."

By acting on complaints made by large EU countries that tech firms aggressively avoid taxes, Vestager and the Commission are pushing back on countries that have enticed digital giants with low tax rates and dug their heels in against reforms.

"I don't think we're done. We haven't changed the full corporate culture yet" — Margrethe Vestager

French President Emmanuel Macron, who has personally led the push in recent months for digital tax reform, promptly voiced support for Vestager's decisions. In a tweet he said countries and companies needed to respect Europe's rules and "tax justice."

The Commission's available arsenal includes an array of regulatory rules like complex state-aid laws to combat the most egregious tax avoidance cases when EU member countries remain at loggerheads over revamping the region’s tax system.

"I don't think we're done," Vestager said, in reference to potential future tax investigations. "We haven't changed the full corporate culture yet."

Many lawmakers in Europe, notably a French-led group of the region's largest economies, want tech giants like Apple and Amazon to pay more on their local sales in individual member countries. These demands have been rejected by smaller countries like Luxembourg, which opened their doors to many of these West Coast tech companies through a combination of low corporate tax rates and other financial incentives.

The region's top competition regulator added that it is still up to individual member countries, not the EU, to determine how countries collect taxes within their borders, but national lawmakers must do more to apply existing rules.

In addition to fueling the already heated debate among European countries trying to hammer out proposals on tax reforms by the end of the year, Vestager's moves on Wednesday will worsen friction between Europe and the United States.

In Washington, lawmakers are trying to revamp the country's domestic tax rulings. Those changes may include potentially allowing tech companies, which collectively hold more than $2 trillion overseas, to repatriate these revenues to the U.S. at a one-off low corporate tax rate.

Central to these arguments are where tech companies, whose digital goods and services transcend national borders, should pay tax, and whether countries across Europe, the U.S. and those farther afield with often conflicting stances on the issue can eventually agree to an international tax overhaul that is acceptable to all.

"If there's no prospect of a global deal, then countries will start to take unilateral measures," said Pascal Saint-Amans, director of the Center for Tax Policy and Administration at the OECD, an international organization helping to push through the international tax reforms. "It's high on the political agenda, and high on people's minds."

European profit, European tax

In her announcement, Vestager said Luxembourg gave Amazon an unfair tax ruling dating to 2003 that amounted to illegal state aid for the tech giant, whose market value is $460 billion and whose operations now span everything from online book sales to groceries.

European investigators said the low-tax deal allowed Amazon to avoid paying tax on three-quarters of its EU profits over an eight-year period. That involved a complicated tax structure in which Amazon siphoned the majority of its income into a corporate entity not liable to pay taxes in Luxembourg or anywhere else in Europe. Between 2006 and 2014, the company paid an effective tax rate of just 7.2 percent on its European operations, according to EU officials.

"Profits earned in Europe should be taxed in Europe," Vestager said Wednesday.

In response, Luxembourg said Amazon was not given preferential tax treatment and it was reviewing the Commission's decisions to determine whether to appeal. The tax decision also represents a potential black eye for Commission President Jean-Claude Juncker, who was both finance and prime minister of the small European country during the period of the alleged wrongdoing.

Amazon, which rejiggered its corporate structure in 2015 to pay more tax in European countries, also said it had complied with all necessary international tax rules.

“Our 50,000 employees across Europe remain heads-down focused on serving our customers and the hundreds of thousands of small businesses who work with us,” the company said.

"Member states need to make sufficient progress to restore competition" — Margrethe Vestager

The Commission also took aim Wednesday at Ireland, which was ordered to claim €13 billion in back taxes from Apple last year after EU regulators said the iPhone-maker had received an unfair tax ruling from Irish authorities. Both Ireland and Apple have appealed the ruling.

Yet a year after Vestager's initial decision on Apple's tax practices in Ireland, the country has yet to pocket any of the multi-billion euro payment. In response, the Commission will take Ireland to Europe's highest court to force it to collect the fees under rarely used powers to enforce Brussels' decisions on national capitals.

"Member states need to make sufficient progress to restore competition," Europe's competition commissioner said Wednesday.

Irish politicians are still hunting for an investment manager to oversee the €13 billion windfall while the country appeals the European tax ruling — a legal process that could take years to complete.

After Wednesday's EU announcement, Apple referred to a statement from July, in which it said the Commission’s ruling against Ireland undermined longstanding international tax agreements. The Irish finance ministry added it had not accepted Brussels' analysis of Apple's tax treatment in the country.

"It is extremely disappointing that the Commission has taken action at this time against Ireland," the ministry said.

The cases against Amazon and Apple are likely to drag on for years amid appeals that will eventually be heard at the European Court of Justice, according to legal experts.

"Now, the Commission is doubling down on their argument," said Fredrik Erixon, director of the European Center for International Political Economy, in reference to EU efforts to force digital companies to pay more tax within the region.

"It’s not only going to provoke legal disputes," he said, "but also will erode other plans to build greater unity about corporate income tax in the EU."