Luxembourg accused of supplying 'state aid' to Amazon

Luxembourg accused of supplying 'state aid' to Amazon

Luxembourg provided “state aid” to Amazon through its tax arrangements for the company, the European Commission has said in a preliminary finding.

The EC launched an investigation into preferential tax arrangements between Luxembourg and Amazon last year, and in a document made public today (16th January) said that its “preliminary view is that the tax ruling . . . 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”.

But in a statement Amazon said: “Amazon has received no special tax treatment from Luxembourg—we are subject to the same tax laws as other companies operating here.”

The finding by the European Commission refers to a tax ruling made in a letter on 6th November 2003 from Luxembourg tax authorities to Amazon, which meant Amazon EU Sarl, the head office of Amazon for Europe, could minimise how its profits were exposed to tax by paying royalties to Amazon Europe Technologies Holding SCS (Lux SCS) under a licensing agreement.

When the European Commission announced its investigations into the tax arrangements, it said: “Based on a methodology set by the tax ruling, Amazon EU Sàrl pays a tax deductible royalty to a limited liability partnership established in Luxembourg but which is not subject to corporate taxation in Luxembourg. As a result, most European profits of Amazon are recorded in Luxembourg but are not taxed in Luxembourg.”

In the report made public today, the EC asked the Luxembourg authorities to provide more information and to explain the “reasons for deviating” from tax arrangements, and to calculate the royalties paid by Amazon EU Sarl over the past 10 years to Lux SCS.

The EC said: “At this stage, the commission considers that the contested tax ruling appears to result in a reduction of charges that should normally be borne by the entity concerned in the course of its business, and should therefore be considered as operating aid.”

Tim Godfray, Chief Executive, The Booksellers Association, said: “The Booksellers Association is pleased to learn that Luxembourg’s unfair tax agreements have been recognised by the European Commission. In 2013, Amazon paid just £4.2m Corporation Tax on UK sales of £4.3 billion, giving them a huge and unfair advantage over High Street bookshops. They have managed to build an estimated market share of 90% in e-books here in the UK.  Our high street booksellers are not able to move costs and sales from country to country - as Amazon has done - to get a tax arrangement below that of the UK.  We urge Xavier Bettel, the Prime Minister of Luxembourg, to take appropriate steps to work with the European Commission to end these tax deals which distort fair competition.”

The European & International Booksellers Federationhas welcomed the EC’s initial finding. Director Françoise Dubruille said: “The EIBF has always urged fair competition among book retailers and a level playing field for all.

“After the change in VAT rules on 1st January 2015, with VAT being charged in the country where customers reside, Amazon  has clearly lost a big advantage, and other retailers can now compete at the same level, which is positive. 

“It comes to no surprise that Amazon is trying to pull other cords to keep its advantages. The EIBF strongly believes in transparency and is pleased to see that the new Commission seems to be reacting in the right direction. We will follow the issue very closely.”