Amazon becomes latest target in Europe's 'sweetheart' tax probe

Amazon becomes latest target in Europe's 'sweetheart' tax probe

Summary: Amazon, Microsoft and others could be drawn into Europe's investigation in to potential violations of state aid laws.

TOPICS: Government, Amazon, EU

Amazon's operations in Luxembourg appear to be the next target for Europe's crackdown on countries that offer favourable tax arrangements to encourage multinationals to set up there.

According to reports, Amazon has now become the latest subject of an investigation announced last month by Europe's competition commission. In June, it began a probe into whether Apple's low rate of tax in Ireland violates European state aid rules.

The EC opened parallel investigations into tax arrangements offered to Starbucks in the Netherlands and Fiat Finance and Trade in Luxembourg.

Competition chief Joaquín Almunia suspects the countries' tax rulings don't comply with Europe's state aid laws and that the companies' selective tax advantages could give them an unfair advantage that could end up distorting competition on the continent.

The investigations will examine the countries' tax rulings in relation to the three companies, rather than the companies themselves. However, as the Financial Times reported on Friday, the companies could foot the bill if the EC find against the countries in question, potentially having to repay tax revenues lost to illegal so-called "sweetheart" deals.

Europe has also questioned Luxembourg about its treatment of Microsoft and McDonalds, Bloomberg reported on Friday.

A spokesman from Almunia's office would not confirm whether its probe had been widened to include Amazon.

"As we have said publicly many times before, the Commission continues to gather information about certain tax practices in several member states, in order to assess the situation from the point of view of EU state aid rules," the spokesman said in a statement.

"It is in any event entirely premature to speculate on whether new investigations could target this or that specific company in the future. At the moment we have three ongoing investigations which relate to tax rulings concerning Apple in Ireland, Starbucks in the Netherlands and Fiat Finance and Trade in Luxembourg."

Ahead of the investigation, the European Commission's High Level Expert Group on Taxation of the Digital Economy recommended Europe overhaul its transfer pricing rules which allow companies to shift profits from higher tax countries to lower-tax countries.

Specifically, Almunia said he was looking into the practice of reducing declared profits by through the prices charged for commercial transactions between entities which are part of the same corporate group.

Amazon had not responded to a request for comment at the time of publishing.

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Topics: Government, Amazon, EU

Liam Tung

About Liam Tung

Liam Tung is an Australian business technology journalist living a few too many Swedish miles north of Stockholm for his liking. He gained a bachelors degree in economics and arts (cultural studies) at Sydney's Macquarie University, but hacked (without Norse or malicious code for that matter) his way into a career as an enterprise tech, security and telecommunications journalist with ZDNet Australia. These days Liam is a full time freelance technology journalist who writes for several publications.

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  • What I'd like to see is....

    These companies pull out of Europe all together.

    This is nothing but the socialist commission hunting new tax revenue.

    Margaret Thatcher: "The problem with socialism is that eventually you run out of other people's money [to spend]."
    • If that's what Europeans want...

      ...then that's what they should have (in a democracy, the citizens tend to get the government they deserve). In any case, it appears that EU law prohibits member states from making sweetheart tax deals with multinationals, so it's the job of the EU to enforce it. EU citizens who think this is bad policy can contact their MEPs.
      John L. Ries
      • And actually....

        ...the US Congress should prevent states and localities here in the USA from making the same sorts of deals (it seems to me that its authority to do so is clear).
        John L. Ries
  • the EC is like Obama...

    tax and spend! It's the time for EU to put some conservatives in charge.
    LlNUX Geek
    • Oh yeah....

      The conservatives in Britain have given away publicly paid for assets to their ilk and taxed us even more for the pleasure. They put massively over budget projects in place without any controls ie that's the agreed cost any more pay yourself. In the process they have put 50-60% on the edge of poverty, 30% in poverty and increased the wealth of their "sponsors" beyond even their own dreams and you want them to do the same in Europe? You must believe in mass debating for pleasure
      Kevin Morley
      • He's a troll

        I strongly suspect that the right wing sloganeering is an act, as real cultists will generally try to argue with (or at least condemn) those expressing contrary opinions. Mind you, few authoritarian followers argue well, but they do usually try.
        John L. Ries
      • I certainly agree to a point

        Mainly the privatisation of public utilities decades ago. However since then, the same can be levelled at labour and no doubt the liberals if they ever made it into power. New labour and the conservatives are a lot closer than any other time and personally I supported the conservative cost-cutting initially when compared to labours borrow our way out of trouble mentality. Labour took the socialist theme and made it work for their own supporters and cronies, they are no better than the conservatives.
        Little Old Man