European Union anti-trust regulators are going to probe Amazon tax contracts with Luxembourg as Brussels believes that the tax deals amount to illegal state aid. The EU’s Competition Commission is readying to launch a thorough examination of Luxembourg’s tax dealings with Amazon, specifically focusing on a 2003 special agreement that capped the online giant’s tax exposure to the Grand Duchy. The probe is another step in a series of investigations that were revealed last week including tax dealings of Apple in Ireland or of Fiat also in Luxembourg. The EU will scrutinize the process in which companies make special arrangements with tax authorities before they actually choose to domicile their operations and activities in a given country. Although the so-called “tax rulings” are not illegal in the EU, Brussels suspects that they amount to promises of indirect subsidies by governments aiming to attract entrepreneurs at the expense of other member states.
Amazon and Apple have been especially in the focus of investigators due to the tax deals that are often described as “sweetheart arrangements”. They enable firms to transfer substantial amounts of their earnings from higher taxed countries to lower taxed countries. Because the European Commission does not have any jurisdiction over national tax policies, the investigation is strictly limited to the measures governing free competition between EU countries. Interestingly, the tiny country was not, allegedly, keen on cooperating with Brussels on the Amazon tax investigation, but changed its opinion once Jean-Claude Juncker was nominated to become the chief of the European Commission.