October 8, 2014

All eyes on Luxembourg

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For one of the smallest sovereign nations in Europe, Luxembourg has served as a battleground for ruling dynasties and falling empires. At just 2,586 square kilometers, this scrappy little country has served as a Roman fortress, a castle for the Frankish Kingdom, and a critical piece of the Spanish Road during the Eighty Years’ War. It’s been ruled by the Burgundians, the Hapsburgs, the French, the Netherlands, the Belgians, the Germans, the Frisians, the Saxons, the Franks, the Prussians, and Holland. But not the Bezoses.

The European Union is currently investigating whether Amazon cut tax deals in Luxembourg in 2003 that aren’t offered to other corporations. (Cutting tax deals is cool with the EU as long as every company is offered the same deal. It’s suspected that Amazon wasn’t.)

Tom Fairless of the Wall Street Journal explains:

The European Commission said it was concerned that a 2003 tax deal granted to Amazon in Luxembourg—and still in force—effectively caps the U.S. company’s tax payments in the Grand Duchy. Luxembourg could be required to recover from Amazon any funds that amount to selective state subsidies, which are illegal under EU law.

In a sign that the tax investigation could spread much wider, the commission said Luxembourg had provided it in August with “information on a number of cases” it had requested as part of the same probe, including Amazon. The regulator is already sifting through information from tax deals in Belgium, Ireland, the Netherlands and the U.K.

“It’s all part of the broader changing of the rules,” Professor Sol Picciotto of Lancaster University in the UK told Gasbard Sebag of Bloomberg News. He then cited recent recommendations by the Organization for Economic Cooperation and Development to overhaul the international corporate tax system.

Amazon said last year that it had always been in favor of paying sales tax. Right! Of course. Let’s quickly review a few stores on Amazon’s tax issues, stateside and abroad:

So Amazon likes to push the laws to the limit and wait to be struck down later, but that doesn’t mean Amazon’s automatically guilty in this particular instance. The broader question is, will the EU investigations change Amazon’s exception status in Luxembourg and beyond? Will we start holding Amazon to the same standard as other businesses and collect taxes, here and abroad?

 

Kirsten Reach was an editor at Melville House.

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