Thursday

25th Feb 2021

EU launches probe into Amazon's Luxembourg tax deal

  • Tax avoidance and evasion costs about €1 trillion per year across the 28 country bloc (Photo: Mags_cat)

The European Commission will launch a probe into Amazon's tax arrangements in Luxembourg, the EU's competition chief has confirmed.

Speaking with reporters on Tuesday (7 October), Joaquin Almunia said the investigation would examine whether Luxembourg had "granted a tax advantage to a large multinational … which constitutes state aid and would distort competition in the EU".

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

In question is a tax ruling made by Luxembourg's tax authorities in 2003 which, more than a decade later, is still being used to calculate the taxes paid by the online warehouse firm.

Most of Amazon's €14 billion worth of European sales are recorded in Luxembourg but are not subject to corporation tax in the Duchy as the result of a scheme which allows the company to shift its profits by using royalty payments.

Instead, Amazon's main European subsidiary, Amazon EU Sarl, pays fees to its parent company Amazon Europe Holding Technologies SCS, a tax exempt partnership, in return for using Amazon's intellectual property.

"We are not calling into question the general tax policy of Luxembourg but whether tax authorities have been too accommodating to Amazon … and given them selective treatment," added Almunia.

The investigation into Amazon follows decisions by the EU executive to examine the tax arrangements of car manufacturer Fiat in Luxembourg, as well as Apple and Starbucks in Ireland and the Netherlands, respectively. The three ongoing cases are also focused on the use of subsidiary firms to minimise tax bills.

Under EU competition rules, special tax rulings for individual companies must not result in them getting preferential treatment, and paying less than rival firms.

If successful, the EU executive has the power to force firms to pay a sum equivalent to the "unlawful aid" they received from governments.

The 'sweetheart' agreements between multi-nationals and governments have been brought into the political spotlight as cash-strapped states try to increase their tax revenues.

"At a time when national budgets are tight … it is even more essential to make sure that multinationals pay their fair share of taxes and do not leverage their power to pay lower tax rates," noted Almunia. The commission estimates that tax avoidance and evasion costs about €1 trillion per year across the 28 country bloc.

In another twist, Almunia told journalists the investigations would be continued by the next commission, headed by Jean-Claude Juncker, who was Luxembourg's prime minister when the 2003 ruling was made.

In a statement, the Luxembourg government said that it was "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".

Dublin to scrap 'double Irish' tax loophole

Ireland is to scrap its controversial tax loophole, as EU countries agree new legislation to claw back the €1 trillion lost to tax cheats each year.

News in Brief

  1. Armenian prime minister denounces 'coup' attempt
  2. UK warns EU against escalating City-of-London battle
  3. Brussels mulls extending data-roaming regime for 10 years
  4. Full list of European firms US forced to ditch Russia pipeline
  5. French diplomat calls Johnson 'inveterate liar'
  6. French town's switch to vegetarian meals prompts backlash
  7. Police seize 23 tonnes of cocaine in Europe's biggest haul
  8. WHO Covax programme delivers first vaccines to Ghana

Opinion

Questions for Germany on EU's Russia strategy

Suspension or cancellation of Nord Stream 2 does not call for a drawn-out search for unanimity by the EU's foreign ministers, nor complex ratification procedures in the European Parliament or member states' parliaments, write three former EU prime ministers.

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic Council to host EU webinars on energy, digitalisation and antibiotic resistance
  2. UNESDAEU Code of Conduct can showcase PPPs delivering healthier more sustainable society
  3. CESIKlaus Heeger and Romain Wolff re-elected Secretary General and President of independent trade unions in Europe (CESI)
  4. Nordic Council of MinistersWomen benefit in the digitalised labour market
  5. Nordic Council of MinistersReport: The prevalence of men who use internet forums characterised by misogyny
  6. Nordic Council of MinistersJoin the Nordic climate debate on 17 November!

Latest News

  1. Who are the EU's new Russian deplorables?
  2. Afghan asylum family beaten in Greece, set adrift at sea
  3. EU leaders face Covid-mutations dilemma at summit
  4. EU sets out plan to mitigate 'unavoidable' climate events
  5. Questions for Germany on EU's Russia strategy
  6. Greenland's snap election exposes global mineral demand
  7. Covid-19 certificates back on EU leaders' agenda
  8. Ethiopia war creating new 'refugee crisis', EU envoy warns

Join EUobserver

Support quality EU news

Join us