|
 The European Commission, which rules on competition and subsidies in
the European Union, announced in October that it had opened an
investigation into a tax ruling struck in 2003 and published details
of its case on Friday.
The investigation, one of a number into large international
companies, focuses on whether Luxembourg broke EU state aid rules by
allowing Amazon to operate almost tax-free in Europe.
Such inquiries have raised questions for European Commission
President Jean-Claude Juncker, former long-time prime minister of
Luxembourg, over his role in the country's tax policies.
The document released on Friday described the online retailer's
structure, with a Luxembourg company functioning as the headquarters
of its European operations and operator of all its European
websites.
The net turnover of that company, which it called LuxOpCo, was 13.6
billion euros ($15.8 billion) in 2013, about a fifth of worldwide
sales of $74.5 billion.
The Commission's inquiry centres on the relationship between LuxOpCo,
pooling revenue from Amazon's EU websites, and Lux SCS, which
received a royalty from LuxOpCo and was not subject to Luxembourg
tax.
The report said it had doubts whether the transfer pricing agreed by
Luxembourg for Amazon reflected what a prudent independent operator
would have accepted under normal market conditions.
RAPID RULING
The Commission further noted that the ruling requested by Amazon was
assessed and accepted within just 11 working days.
The presentation of the royalty payment, expressed as a percentage
of revenue, seemed to be a "cosmetic arrangement".
"It also follows from the above that Amazon has a financial
incentive to exaggerate the amount of the royalty when applying the
transfer pricing arrangement approved in the contested tax ruling,"
the document said.
[to top of second column] |
The tax ruling was still in force more than a decade later in 2014,
the Commission's document said, far longer than rulings currently
concluded by EU members.
In that decade, Amazon's global business had grown explosively, with
sales nearly 15 times higher than in 2003.
The 23-page document, dated Oct. 7 and signed by previous EU
Competition Commissioner Joaquin Almunia, concluded that Luxembourg
appeared to have given Amazon an unfair advantage.
"The Commission's preliminary view is that the tax ruling of 5
November 2003 by Luxembourg in favour of Amazon constitutes state
aid... and the Commission has doubts at this stage as to that
ruling's compatibility with the internal market."
The Commission is also investigating the tax arrangements of Italian
carmaker Fiat in Luxembourg, Apple in Ireland and Starbucks in the
Netherlands.
Current Competition Commissioner Margrethe Vestager has said she
wants to reach decisions in the four cases by the second quarter. A
recipient of illegal state aid typically has to return the money to
the state in question.
($1 = 0.8596 euros)
(Additional reporting Robert-Jan Bartunek; Editing by Alastair
Macdonald and Keith Weir)
[© 2014 Thomson Reuters. All rights
reserved.] Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
