Amazon faces official EU watchdog probe over its tax arrangement deal with Luxembourg
Amazon’s tax affairs are to come under fresh scrutiny from the European Union (EU), which has launched an investigation to determine whether a tax agreement with Luxembourg signed in 2003 breaks EU competition rules
“The European Commission has opened an in-depth investigation to examine whether the decision by Luxembourg’s tax authorities with regard to the corporate income tax to be paid by Amazon in Luxembourg comply with the EU rules on state aid,” said the Commission.
The deal with Luxembourg means that all of Amazon’s online sales are technically between the customer, and a Luxembourg-based Amazon holding company, namely Amazon EU Sarl. Amazon EU Sarl reports little to no profits, despite achieving nearly 14 billion euros of sales each year (£11bn).
“National authorities must not allow selected companies to understate their taxable profits by using favourable calculation methods,” stated Joaquín Almunia, the outgoing Commission VP in charge of competition policy.
“It is only fair that subsidiaries of multinational companies pay their share of taxes and do not receive preferential treatment which could amount to hidden subsidies,” said Almunia. “This investigation concerning tax arrangements for Amazon in Luxembourg adds to our other in-depth investigations launched in June. I welcome that cooperation with Luxembourg has improved significantly.”
“Fair tax competition is fundamental for a healthy Single Market and our common economic prosperity,” added Algirdas Šemeta, Commissioner for Taxation. “As we work together to restore growth and competitiveness, it is essential to tackle the harmful tax practices which erode the tax bases of EU Member States. Fair play in taxation must be the rule.”
Amazon has denied the arrangement means that it gets preferential treatment from Luxembourg.
“Amazon has received no special tax treatment from Luxembourg, we are subject to the same tax laws as other companies operating here,” the company told Reuters.
And the finance ministry of Luxembourg has also defended the arrangement.
“Luxembourg is confident that the allegations of state aid in this case are unsubstantiated and that the Commission investigation will conclude that no special tax treatment or advantage has been awarded to Amazon,” the Ministry is quoted as saying.
Politicians on all side in both US and Europe have grown increasingly irritated at the tax loopholes in some countries that are legally used by many corporations to minimise their tax bills. Amazon is currently facing a court battle with the US Internal Revenue Service over the Luxembourg arrangement.
The Amazon investigation comes after the European Commission in June announced it had opened three in-depth investigations into Apple, over charges that the iPhone maker is avoiding hefty tax bills.
Last May, a US Senate committee accused Ireland of giving special tax treatment to Apple and others. Senator Carl Levin, chairman of the subcommittee, dubbed the Apple structure “the Holy Grail of tax avoidance.”
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