The European Commission is poised to begin a formal probe into allegations that Amazon has illegally benefited from state subsidies in Luxembourg over the past decade, according to a report in the Financial Times.
The FT, citing sources familiar with the case, said that the investigation would focus on the favourable terms given to the online retailer under a 2003 tax ruling, which caps its tax exposure in Luxembourg to less than 1% of the company's European income.
According to sources, the EC is contending that Luxembourg allowed Amazon to misallocate gains within its corporate structure, allowing it artificially reduce its tax bill. If the charges are proven, the EC can ask Luxembourg to recoup its state subsidy from Amazon.
Earlier this year, Amazon filed accounts at Companies House in the UK showing that it paid £4.2m in tax, on sales of £4.3bn, prompting protest from MP Margaret Hodge, chair of the House of Commons Public Accounts Committee, and leading to a poster campaign from the Booksellers Association.
Representatives from the EC, Amazon, and Luxembourg's Ministry of Finance did not respond to requests to the FT's requests for comment.