Along with other multinational companies, including Apple, Starbucks, and Fiat, Amazon is facing increasing scrutiny from the European Union in recent months over its tax strategies in Europe.
On Friday, regulators from the European Union published preliminary findings in a 23-page report, claiming that the current tax deal Amazon receives in Luxembourg—where Amazon has its European headquarters—constitutes illegal state aid. The deal was signed in 2003.
According to the preliminary report, which Amazon will now have a chance to respond to, the tax agreement not only breaks EU rules, but also gives Amazon an unfair advantage over the competition by letting it sell products more cheaply. Though Amazon is based in Seattle, its Luxembourg office had a net revenue of €13.6 billion ($15.82 billion) in 2013.
The investigation could conceivably result in Amazon owing hundreds of millions of euros in back taxes.
Luxembourg has previously been accused of offering similarly tax-friendly deals to companies such as Pepsi and FedEx. In an official statement, the country’s ministry of finance said:
Luxembourg is confident that the allegations of State aid in this case are unsubstantiated and that it will be able to convince the Commission in due time of the legitimacy of the tax ruling and that no selective advantage has been granted.
Amazon, meanwhile, has claimed it is subject to the same tax laws as other companies operating in Luxembourg.
Among the questions being asked by the EU regulators are whether Luxembourg sufficiently examined Amazon’s proposals about “transfer pricing” regarding the moving of money between Amazon subsidiaries in different countries.
The investigation is part of a large-scale clampdown on multinational companies shuttling revenue from country to country in order to reduce tax payments.
[via Wall Street Journal]]