Investigation
centres on local tax ruling secured by Amazon EU Sàrl deemed by critics so
generous as to amount to state aid
The Guardian, Simon Bowers, Wednesday 8 October 2014
The European commission has widened its investigation into the tax treatment of multinationals, opening a formal investigation into whether online retailer Amazon’s complex tax arrangements in Luxembourg are so generous as to amount to state aid for the $146bn (£90bn) group.
Amazon's tax arrangements are being investigated by the European commission. Photograph: Lionel Bonaventure/AFP/Getty Images |
The European commission has widened its investigation into the tax treatment of multinationals, opening a formal investigation into whether online retailer Amazon’s complex tax arrangements in Luxembourg are so generous as to amount to state aid for the $146bn (£90bn) group.
At the
heart of the investigation is a local tax ruling secured in 2003 by Amazon’s
main European operating subsidiary, Amazon EU Sàrl. This business takes sales
from across Europe, including more than £4bn from UK customers.
The
Luxembourg tax ruling clears Amazon EU Sàrl to pay large royalties to a sister
operation, depressing its taxable profits. That sister entity is a Luxembourg
limited partnership but is not subject to Luxembourg tax.
“As a
result, most European profits of Amazon are recorded in Luxembourg but are not
taxed in Luxembourg,” the European commission said in a statement.
“At this
stage the commission considers that the amount of this royalty ... might not be
in line with market conditions.”
The
investigation will now test these concerns further, and the commission stressed
the outcome of its investigation had not prejudged.
The US
company, headed by Jeff Bezos (below), denied the charge. “Amazon has received
no special tax treatment from Luxembourg, we are subject to the same tax laws
as other companies operating here,” it told Reuters.
The
Luxembourg finance ministry said: “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.”
Joaquín
Almunia, the Spanish politician who is currently head of competition policy at
the commission, said that “national authorities must not allow selected
companies to understate their taxable profits by using favourable calculation
methods”.
“It is only
fair that subsidiaries of multinational companies pay their share of taxes and
do not receive preferential treatment [that] could amount to hidden subsidies,”
Almunia added.
The
commission has already opened three other state aid investigations into the tax
arrangements of large multinationals. These include Apple in Ireland, Fiat
Finance and Trade in Luxembourg, and Starbucks in the Netherlands.
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