Luxembourg’s unlawful State aid to Amazon

The European Union (EU) antitrust regulator has published some details of its investigation into online retailer Amazon’s tax deal with Luxembourg deemed an “unlawful State aid”. The European Commission (EC) released an unclassified 23-page letter highlighting how Amazon shifted profits to decrease its taxes. “At this stage (October 7, 2014), the (EC) 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,” the regulator wrote in the letter to Jean Asselborn, the Luxembourg foreign minister.

Indeed, most European profits of the US online retailer have been recorded in Luxembourg since 2003 but have not been taxed there as result of a bilateral tax ruling which is still in force today. This Amazon case also aims to tell the public opinion, after the much publicized cases with Apple in Ireland and Starbucks in the Netherlands, that the EU seeks to intensify its probes into this kind of unfair tax practices that both penalize state budgets and free competition. It could also force the EC’s president and former prime minister of Luxembourg Jean-Claude Juncker to give further explanations about why and to what extent his country has deliberately established such “a favorable tax environment” to the detriment of its European partners.