European Union anti-trust regulators are to challenge Luxembourg over its tax deals with Internet shopping giant Amazon that Brussels believes amount to illegal state aid, a report said on Tuesday.
According to the Financial Times, the EU’s Competition Commission is preparing to launch an in depth probe of Luxembourg’s tax dealings with Amazon, focusing in particular on a 2003 special arrangement that effectively capped the online giant’s tax exposure to the Grand Duchy.
If confirmed, the probe would follow in the tracks of investigations revealed last week into the tax dealings of iPhone maker Apple in Ireland and of the financial arm of automaker Fiat, also in Luxembourg.
The in-depth probes follow initial investigations and will take an even closer look into so-called “tax rulings”, special arrangements made with tax authorities before a company chooses to domicile activities in a given country.
Tax rulings are not illegal in the EU, but Brussels regulators suspect they amount to promises of indirect subsidies by governments seeking to attract businesses at the expense of other member states.
Apple and Amazon have come under intense pressure from politicians and campaigners over their tax deals, with critics saying sweetheart arrangements allow companies to move billions in earnings from higher taxed countries to lower taxed ones.
The European Commission has no jurisdiction over national tax policies — a cherished prerogative of member states, so the probes are strictly limited to rules governing free competition between EU countries.
The investigation of Luxembourg’s tax affairs also comes just weeks before Jean-Claude Juncker, the tiny country’s former prime minister, is to take the reins of the European Commission.
According to the Financial Times, the Luxembourg government initially refused to cooperate with Brussels on the Amazon tax deal probe, but softened its approach once Juncker was nominated to head the Commission.