Gaspard Sebag Brussels
AMAZON.COM faces an in-depth EU probe into a 2003 fiscal deal with Luxembourg over suspicions that it unfairly shifted profits to the country to lower its taxes.
Most of the European profits of the US online retailer were recorded in Luxembourg but were not taxed there as a result of the pact, which was still in force today and applied to a subsidiary in the Grand Duchy, the EU said in a statement.
The inquiry comes amid a global crackdown on corporate tax avoidance as governments struggle to increase revenue and reduce deficits. It expands a probe into Apple in Ireland, Starbucks in the Netherlands and Fiat Finance & Trade in Luxembourg.
“National authorities must not allow selected companies to understate their taxable profits by using favourable calculation methods,” EU competition chief Joaquín Almunia said.
The Luxembourg ruling allowed Amazon EU to pay a tax-deductible royalty to a limited liability partnership established in the country that was not subject to corporate taxation, the EU said. This might amount to an unfair advantage.
Prices for intra-group transactions had to be estimated on market prices, otherwise groups of companies could lower their taxable profit, it said. Firms that bought and sold goods or services from the market would be at a disadvantage.
Luxembourg had not provided any detail about any expiry date for the tax ruling, a person familiar with the case said. The European Commission has the power to ban and order recovery of selective public subsidies, including tax advantages, that distort competition.
Luxembourg’s finance ministry and Amazon did not respond to requests for comment ahead of the EU’s statement.
The EU was also looking into Luxembourg’s tax deals with Microsoft and McDonald’s, people familiar with the matter said in July.
Tax probes including delving into Apple’s agreements with Ireland are a priority, according to the woman set to take over from Almunia.
Margrethe Vestager, a former Danish economy minister, said last week that it was important big companies paid a fair share of taxes and small firms were not left to carry the burden.
The commission has said tax avoidance and evasion in the EU cost about e1 trillion (R14 trillion) a year.
Apple and Irish authorities have criticised a preliminary EU finding that the country gave favourable tax treatment in return for job creation. Gibraltar said last week that Almunia showed Spanish bias for probing the territory’s tax system. – Bloomberg