BRUSSELS--European Union regulators opened a formal probe into
Amazon.com Inc.'s tax arrangements in Luxembourg, snaring another
major U.S. company in a high-profile investigation that has already
spread to Apple Inc. and Starbucks Corp.
The European Commission, the region's antitrust authority, said
it is concerned that a 2003 tax deal granted by Luxembourg's tax
authorities to Amazon may amount to illegal state subsidies for the
U.S. company. The commission could ask Luxembourg to recover from
Amazon any taxes that it considers unpaid.
In a sign that the tax probes could spread much wider, the
commission said Luxembourg had provided it in August with
"information on a number of cases" it had requested as part of the
same investigation, including Amazon.
The 2003 tax ruling in Luxembourg, which applies to Amazon's
local subsidiary Amazon EU Sarl, "could underestimate the taxable
profits" of the unit, which records most of Amazon's European
profits, the commission said.
That would "grant an economic advantage to Amazon by allowing
the group to pay less tax than other companies whose profits are
allocated in line with market terms," the regulator said.
The EU's rules on state aid prohibit governments from providing
selective advantages to individual companies, to ensure that
companies across the 28-nation bloc compete fairly.
"It is only fair that subsidiaries of multinational companies
pay their share of taxes and do not receive preferential treatment
which could amount to hidden subsidies," the EU's antitrust chief,
JoaquĆn Almunia, said in a statement.
The new investigation comes hot on the heels of three
investigations opened in June into generous tax deals granted to
Apple in Ireland, Fiat Finance and Trade in Luxembourg and
Starbucks in the Netherlands. Fresh details of the Apple and Fiat
probes emerged last week.
European authorities are seeking to clamp down on tax avoidance
by multinationals in the wake of the region's financial crisis,
which has forced painful belt-tightening on citizens and
governments across the bloc.
At issue are so-called transfer-pricing arrangements, under
which companies can redistribute profit within a group by charging
for goods or services sold by one subsidiary to another, typically
located in different countries. Experts say companies can use
transfer pricing to minimize their tax bills.
While not illegal, such arrangements could violate EU rules if
tax authorities allowed specific companies to charge prices
internally that didn't reflect market conditions,
Write to Tom Fairless at tom.fairless@wsj.com
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