The European Union announced on Friday (16 January) that the tax deals between the Internet shipping giant, Amazon, and Luxembourg were illegal saying that “preliminary view is that the tax ruling… by Luxembourg in favor of Amazon constitutes state aid”. Illegal tax breaks provided by the government of Luxembourg have brought EU Commission President, Jean-Claude Juncker, back in the spotlight over deals that were made during his term as the duchy’s prime minister.
The preliminary findings into the contracts between Amazon and the duchy were the latest in a more extensive probe by the EU into “sweetheart” tax contracts between major global corporations and some countries. Similar tax agreements are widespread and often legal, constituting tax avoidance rather than tax evasion, which is illegal. The Amazon’s case follows last year’s “Luxleaks” scandal which pointed to the problem of tax breaks granted by Luxembourg’s government during Mr Juncker’s term to many big companies. The official statement revealed that the Commission is concerned at this stage about the compatibility of this ruling with the EU internal market rules, which are supposed to guarantee a level playing field for firms and to protect consumers.
Luxembourg, however, disagrees with the ruling saying that “the allegations of state-aid are without merit” promising that “it will be able to show that its tax arrangements were legitimate and afforded no unfair advantage.” The country was fully cooperating with the EU during the investigation and provided regulators with all the information and dossier requested. Brussels has started similar probes into the tax deals between U.S. tech giant Apple and Ireland, coffee-shop chain Starbucks with the Netherlands, and Italian car maker Fiat also with Luxembourg. If they are found illegal, the affected country would have to recover the amount provided in suspicious state aid, which is potentially a lot of money given the fact that some tax arrangements were concluded as early as five years ago.