Amazon's Luxembourg tax deal may be illegal: EU

BRUSSELS

U.S. online retailer Amazon’s tax deals with Luxembourg -- recently highlighted under the "Lux Leaks" furore -- may be illegal, the European Union has stated.

The European Commission -- the EU’s executive body -- expressed concern on Friday that Luxembourg may have granted economic advantage to Amazon by allowing it to pay less tax than other companies whose profits were assessed in line with market terms and said it would continue to investigate the matter.

Joaquin Almunia, the Commission's Vice President in charge of competition policy, said in a press release: "National authorities must not allow selected companies to understate their taxable profits by using favorable calculation methods.

''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.''

'Harmful practices'

Amazon's tax practices are being investigated by the European Commission along with those of Apple, Starbucks and Fiat.

Algirdas Semeta, the European Commissioner for Taxation, said: "As we work together to restore growth and competitiveness, it is essential to tackle the harmful tax practices which erode the tax bases of EU Member States.

"Fair play in taxation must be the rule."

Luxembourg’s tax practices came under scrutiny after an investigation by the International Consortium of Investigative Journalists (ICIJ) alleged in November 2014 that hundreds of big-name corporations like Pepsi, IKEA and FedEx had secured secret deals with the tiny EU state which saved them billions of dollars in global taxes.

The EU opened an in-depth investigation into Amazon's arrangements in Luxembourg in October last year.