European regulators are scrutinizing tax deal between Luxembourg and Amazon which may amount to “illegal state aid,” reports suggest.
According to the financial times, the EU’s Competition Commission is on the verge of launching an intense probe into the country’s tax arrangements with the online retail giant. The publication says that a 2003 arrangement may have led to potentially illegal subsidies for operations conducted in Europe over almost a decade.
Tax rulings and arrangements are not illegal in Europe but several such delas have come under scrutiny in the past several years to check the credibility of the arrangements and , if any, illegal deals. Such deals hamper the revenue the country should earn from the foreign investments as their would be tax breaks and reduced levels of income from the company.
Amazon’s 2003 arrangement focuses on a deal which capped the tech giant’s tax exposure to the Grand Duchy, According to people familiar with the matter, this special arrangement limited the firm’s overall bill to less than one percent of Amazon’s European revenue.
The retail giant is not the only company facing tax-based investigations by EU regulators– as Apple in Ireland, Starbucks in the Netherlands and Fiant Finance and Trade in Luxembourg have also come under fire in the recent times. It is alleged that Apple and the Irish government struck a deal which gives the iPad and iPhone maker a lower corporate tax rate of around two percent in the country, while the standard rate is over 12 percent. In return, apple is to guarantee jobs in Ireland.