E-commerce
Amazon drawn into EU probe over whether Luxembourg tax deal breached state aid rules
Amazon was today dragged into an EU probe investigating the use of offshore tax havens to slash their bill, it has been revealed.
The online retailer is among a host of multinationals whose tax bills have fallen under the spotlight since the European Commission widened its inquiry into how firms use countries such as Luxembourg to cut their tax bill, an official with knowledge of the matter said today.
Other companies to be drawn into the examination because of their links to the tax shelter include building equipment maker Caterpillar and UK mobile telecoms group Vodafone, while Apple, Starbucks and Fiat Finance and Trade are already on the list.
The Financial Times revealed that Amazon's main European operating company, Amazon EU Sarl is being examined over whether its decisions on corporate tax complied with state aid rules.
An EU official told the newspaper: 'We are looking into what kind of arrangement Luxembourg has with Amazon.'
The company was criticised last month after it was shown to have funnelled about £11bn through its Luxembourg-based subsidiary in 2013, but paid only £4 million in UK corporation tax last year - 0.1 per cent of the £4.3bn in sales that the company generated in the UK last year.
The internet giant even claimed a £4m tax rebate from the Luxembourg Government.
Last month, the Commission warned Ireland, another EU country that offers companies offshore tax status, that it could investigate more companies beyond Apple Inc as part of its probe into European tax practices.
'The Commission continues to gather information on the tax practices of member states ... and this might lead to new formal investigations,' said the official, who declined to be named because of the sensitivity of the matter.
'It would be premature to speculate on whether ... formal investigations could be opened about any specific company.'
Luxembourg is used by many multinationals including online retailer Amazon, building equipment maker Caterpillar and UK mobile telecoms group Vodafone.
Pushed by France and Germany, Brussels is keen to clamp down on what it sees as unfair tax competition across the bloc.
If the Commission can prove countries such as Luxembourg and Ireland agree tax treatments that diverge from international rules, it could deem any corporate tax savings to be a form of subsidy that must be halted or even repaid.
In a strongly worded statement in March, the Commission, the EU executive, chastised Luxembourg, saying it had 'failed to adequately answer previous requests for information' and ordered it to outline many details of its tax system.
The finance ministry in Luxembourg was not immediately available for comment on Friday but in June it said it had 'doubts about the legality of certain aspects of the European Commission's information requests.'
Corporate profit-shifting has come under the international spotlight in recent years following reports of how companies such as Apple use complex structures to slash their tax bills.
The investigation is centred around the commonly-used practice of transfer pricing - a profit allocation method employed to attribute a multinational corporation's net profit (or loss) before tax to countries where it does business.
This is one way multi-national companies are able to spread or reallocate earning from the parent company's net profit.
A Reuters examination in 2012 of accounts filed by 25 Amazon units in six countries showed how tax arrangements in Luxembourg also allowed the company to avoid paying more tax in the United States, where the company is based.
Tax advisers say Luxembourg has helped attract more than 40,000 holding companies and thousands of high-paying jobs for its population of nearly half a million.
(Published by MailOnline - July 4, 2014)