The European Commission (EC) has begun an investigation into whether Amazon struck a tax deal with Luxembourg that amounted to state aid.
The move comes amid a crackdown in Brussels on EU Member States that offer “sweetheart” tax deals to multinational corporations.
Other ongoing investigations concern Apple in Ireland, Starbucks in the Netherlands and Fiat, also in Luxembourg.
Amazon currently has its European base in Luxembourg and the deal with the government, still in place today, has been set up since 2003.
The EC say that the deal amounts to a cap on Amazon’s tax base, where Luxembourg’s tax authorities have agreed to set a limit to the amount the company pays, no matter how much profit they make.
Joaquin Almunia, vice president of the EC, said:
“Let me clarify once more that we are not calling into question the general tax system of Luxembourg here. What we want to find out by launching this probe is whether the tax authorities of Luxembourg have been too accommodating to Amazon in applying transfer pricing rules. More precisely, we are looking at whether selective tax advantages have been granted to a particular company.”
Amazon has officially responded to the investigation, saying that no special arrangement exists between them and Luxembourg.
This being said, it’s not the first time that Amazon have been in trouble with their tax affairs. In 2013 it was found that the UK arm of Amazon paid just £2.4 million in tax, despite registering £4.2 billion in sales.
Image by Steve Jurvestson