Amazon is paying too little for how much it sells in Europe

Oct 7, 2014 09:04 GMT  ·  By

The European Commission is setting targets on yet another American company. Amazon is going to be formally investigated following allegations that Luxembourg allowed the company to illegally benefit from state subsidies for its European operations for the past decade.

The investigation wants to figure out whether the favorable terms Amazon was given under a 2003 tax ruling were fair or not. The decision capped Amazon’s tax exposure and limited the overall cost to less than 1 percent of the European income, the Financial Times reports.

Luxembourg is suspected of allowing Amazon to misallocate gains within the company in a manner that fell short of standards expected of transactions between corporate subsidiaries. This enabled Amazon to artificially reduce the tax bill, which is obviously not something that European authorities are fans of, especially given the context.

The results of the investigation are far from being communicated, but if the commission manages to find proof for the charges, Luxembourg can be asked to get back all the lost money from the company, since the state subsidies may have been granted without actual basis.

It seems that Amazon managed to minimize its tax bill by having the United States unit that owns the tech licenses lease the right to re-license the technology to a tax-exempt partnership in Luxembourg.

Amazon is not the only one

Amazon, like many other tech companies, has been paying less and less in taxes, even though the European sales have hiked considerably during this time and, therefore, should see the company pay more to the state. That hasn’t happened, however, and this has gotten quite a few companies in trouble along the years, including Google, Apple, and Facebook.

The case is particularly sensitive since the incoming Commission President, Jean-Claude Juncker, was the Grand Duchy’s longtime premier at the time the deals were made.

While Amazon says it has paid all applicable taxes in the jurisdictions it operates within. Of course, there’s no word on whether or not they’re getting special treatment in said jurisdictions in order for them to pay taxes that are next to nothing compared to the money coming through.

Amazon has been busy disputing tax bills both in the United States, where they hit some $1.5 billion (€1.18 billion), and France, where they’re supposed to pay $250 million (€198 million).

It should be interesting to see what number the European Commission comes up with for Luxembourg and just how much has Amazon been excused from paying.