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| Amazon’s Tax Deal in Luxembourg Is Latest Target of E.U. Inquiries | Amazon’s Tax Deal in Luxembourg Is Latest Target of E.U. Inquiries |
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| LONDON — The European Commission has added Amazon to the string of multinational companies whose tax activities it is questioning, announcing on Tuesday that it was investigating whether Luxembourg had given the company illegal preferential tax treatment. | LONDON — The European Commission has added Amazon to the string of multinational companies whose tax activities it is questioning, announcing on Tuesday that it was investigating whether Luxembourg had given the company illegal preferential tax treatment. |
| The inquiry, which will explore whether Luxembourg broke the European Union’s competition rules, follows similar investigations into the tax arrangements of Apple in Ireland and Starbucks in the Netherlands. | The inquiry, which will explore whether Luxembourg broke the European Union’s competition rules, follows similar investigations into the tax arrangements of Apple in Ireland and Starbucks in the Netherlands. |
| The commission, the administrative arm of the European Union, also previously said it was examining whether Luxembourg had granted unfair tax advantages to Fiat Finance and Trade, a unit of the Italian automaker. | |
| A country’s using attractively low tax rates to lure businesses is not illegal under European Union rules. But making special corporate tax deals that are not available to all companies could amount to so-called illegal state aid. | |
| Apple’s tax dealings with Ireland have generated considerable attention, including from a Senate investigation in the United States. But as the European Commission casts a wider net in Luxembourg, a tiny country where many big multinationals have operations, the tax investigations there could potentially have a much bigger impact on global corporations. | Apple’s tax dealings with Ireland have generated considerable attention, including from a Senate investigation in the United States. But as the European Commission casts a wider net in Luxembourg, a tiny country where many big multinationals have operations, the tax investigations there could potentially have a much bigger impact on global corporations. |
| “The tone of the commission’s comments relating to Luxembourg is generally harsher than their statements on Ireland,” said Heather Self, an accountant at the British law firm Pinsent Masons, noting that the country was “becoming a focus of the state-aid investigations.” | “The tone of the commission’s comments relating to Luxembourg is generally harsher than their statements on Ireland,” said Heather Self, an accountant at the British law firm Pinsent Masons, noting that the country was “becoming a focus of the state-aid investigations.” |
| The Amazon inquiry is also the latest sign of the heightened scrutiny big American technology companies are receiving in Europe, where lawmakers have routinely questioned their tax practices, privacy policies and dominance of the business sectors in which they operate. | The Amazon inquiry is also the latest sign of the heightened scrutiny big American technology companies are receiving in Europe, where lawmakers have routinely questioned their tax practices, privacy policies and dominance of the business sectors in which they operate. |
| Amazon also has faced a criticism in Germany, where local unions have gone on strike over the last 18 months and where the country’s book publishers have accused the e-commerce company of violating local competition rules. | |
| The European Commission is questioning whether Luxembourg gave Amazon a tax deal that might have enabled the company to gain unfair cost advantages over competitors. | The European Commission is questioning whether Luxembourg gave Amazon a tax deal that might have enabled the company to gain unfair cost advantages over competitors. |
| “In a time when budgets are tight, companies should not be allowed to negotiate special tax treatment,” Joaquín Almunia, the vice president of the European Commission responsible for competition issues, told reporters on Tuesday. “Some multinational companies are using tax strategies to reduce their tax burden, eroding the tax bases in some European states.” | “In a time when budgets are tight, companies should not be allowed to negotiate special tax treatment,” Joaquín Almunia, the vice president of the European Commission responsible for competition issues, told reporters on Tuesday. “Some multinational companies are using tax strategies to reduce their tax burden, eroding the tax bases in some European states.” |
| In a statement, Amazon said it had not received any special tax treatment from Luxembourg.“We are subject to the same tax laws as other companies operating here,” it said. | In a statement, Amazon said it had not received any special tax treatment from Luxembourg.“We are subject to the same tax laws as other companies operating here,” it said. |
| Luxembourg said it was cooperating with the European Commission’s investigations. | Luxembourg said it was cooperating with the European Commission’s investigations. |
| “Luxembourg is satisfied that the allegations of state aid are unfounded and that the investigation will allow the commission to conclude that no special tax treatment or benefits have been granted to Amazon,” the country’s finance ministry said in a statement Tuesday. | “Luxembourg is satisfied that the allegations of state aid are unfounded and that the investigation will allow the commission to conclude that no special tax treatment or benefits have been granted to Amazon,” the country’s finance ministry said in a statement Tuesday. |
| Fiat last week rejected claims that it had received preferable tax treatment from the Luxembourg authorities. | Fiat last week rejected claims that it had received preferable tax treatment from the Luxembourg authorities. |
| Luxembourg’s willingness to cooperate with the tax inquiries follows a previous standoff with European authorities, who filed an injunction this year to demand that Luxembourg supply information related to the continuing tax investigations. | |
| The Amazon investigation centers on a complex web of company subsidiaries in Luxembourg. As part of a 2003 agreement with local authorities, Amazon was able to cap the amount of tax it paid, regardless of the company’s European profits, according to Mr. Almunia, who said that the tax arrangement remained in place. | The Amazon investigation centers on a complex web of company subsidiaries in Luxembourg. As part of a 2003 agreement with local authorities, Amazon was able to cap the amount of tax it paid, regardless of the company’s European profits, according to Mr. Almunia, who said that the tax arrangement remained in place. |
| The commission contends that Amazon is able to use so-called transfer-pricing deals in which most of the company’s European revenues are sent to one Luxembourg-based subsidiary. That subsidiary then paid royalties to a separate Amazon unit, which had the effect of reducing the amount of profit the company generated from its European operations. This complicated system allowed Amazon to cut its tax bill, according to European authorities. | |
| Although Amazon generated more than half of its $74 billion in revenue from the United States last year, European countries — particularly Germany and Britain — remain some of the company’s largest global markets. Amazon’s European operations generated revenue of about $20 billion in 2013, or about two-thirds of the company’s international sales, according to company filings. | Although Amazon generated more than half of its $74 billion in revenue from the United States last year, European countries — particularly Germany and Britain — remain some of the company’s largest global markets. Amazon’s European operations generated revenue of about $20 billion in 2013, or about two-thirds of the company’s international sales, according to company filings. |
| The use of its international tax structure helped cut Amazon’s 2013 tax rate in the United States, which has a nominal rate of 35 percent, to 31.8 percent, according to the company’s regulatory filings. Part of that lower rate had been a result of a “foreign tax differential” of 8.1 percentage points linked to the Luxembourg strategy for its European taxes, the company said. | |
| Luxembourg also has become home to a number of other large international companies, many of which have been attracted by its corporate tax policies. The steel giant ArcelorMittal has its headquarters there, while the British telecom company Vodafone has a financial subsidiary in the country. Neither company is under investigation by European authorities for its tax arrangements. | |
| The commission’s continued focus on Luxembourg, which may have to recover back taxes from Amazon or other companies if Europe’s antitrust officials eventually find wrongdoing, represents awkward timing for Jean-Claude Juncker, the former prime minister of that country, who is to become president of the European Commission in November. | The commission’s continued focus on Luxembourg, which may have to recover back taxes from Amazon or other companies if Europe’s antitrust officials eventually find wrongdoing, represents awkward timing for Jean-Claude Juncker, the former prime minister of that country, who is to become president of the European Commission in November. |
| Critics have accused Mr. Juncker of helping to turn the small landlocked country of 550,000 people into a tax haven during his almost two decades as prime minister. Now he will be expected to play some sort of oversight role in the continuing inquiries after he assumes his new role next month. | Critics have accused Mr. Juncker of helping to turn the small landlocked country of 550,000 people into a tax haven during his almost two decades as prime minister. Now he will be expected to play some sort of oversight role in the continuing inquiries after he assumes his new role next month. |
| Natasha Bertaud, a spokeswoman for Mr. Juncker, said Tuesday that the European Commission was independent from the activities of any country within the 28-member bloc. | Natasha Bertaud, a spokeswoman for Mr. Juncker, said Tuesday that the European Commission was independent from the activities of any country within the 28-member bloc. |
| “There are currently several open investigations against Luxembourg,” she said. “As commission president, Mr. Juncker will oversee this stream of commission work as with all other member states.” | “There are currently several open investigations against Luxembourg,” she said. “As commission president, Mr. Juncker will oversee this stream of commission work as with all other member states.” |
| Industry groups have questioned whether Europe’s policy makers are making special targets out of big American tech companies like Apple and Amazon, compared with their local rivals. Many of those companies have used complex tax structures in places like Ireland and the Netherlands to shield themselves from paying corporate taxes. | Industry groups have questioned whether Europe’s policy makers are making special targets out of big American tech companies like Apple and Amazon, compared with their local rivals. Many of those companies have used complex tax structures in places like Ireland and the Netherlands to shield themselves from paying corporate taxes. |
| The nominee to be the European Commission’s overseer of digital markets, Andrus Ansip, indicated this week that corporate tax rates might be something he also planned to watch. | The nominee to be the European Commission’s overseer of digital markets, Andrus Ansip, indicated this week that corporate tax rates might be something he also planned to watch. |
| “Tax is a really sensitive issue,” Mr. Ansip said Monday evening during his nomination hearing in Brussels. “There will be a negative response for those companies that are using negative tax policies.’' | “Tax is a really sensitive issue,” Mr. Ansip said Monday evening during his nomination hearing in Brussels. “There will be a negative response for those companies that are using negative tax policies.’' |
| Google, whose European headquarters are in Dublin and which also has been accused of unfairly reducing its overall tax burden, is not facing any investigation into its practices, according to a company spokesman. | Google, whose European headquarters are in Dublin and which also has been accused of unfairly reducing its overall tax burden, is not facing any investigation into its practices, according to a company spokesman. |
| Mr. Almunia, who will leave office next month as part of the transition to a new European Commission, on Tuesday dismissed criticisms that the tax investigations were targeting American corporations, saying that the investigations were instead focused on ensuring that no European country gave preferential treatment to one company over another. | Mr. Almunia, who will leave office next month as part of the transition to a new European Commission, on Tuesday dismissed criticisms that the tax investigations were targeting American corporations, saying that the investigations were instead focused on ensuring that no European country gave preferential treatment to one company over another. |
| “I don’t differentiate between companies,” said Mr. Almunia, before adding: “I can’t exclude that new investigations will not be opened.” | “I don’t differentiate between companies,” said Mr. Almunia, before adding: “I can’t exclude that new investigations will not be opened.” |