EU widens tax investigation into multinationals

Amazon cat [Flickr/Stephen Woods]
Amazon cat [Flickr/Stephen Woods]

The European Commission is widening its probe into how multinationals use countries such as Luxembourg to cut their tax bill, an official with knowledge of the matter said on Friday (4 July).

Last month, the Commission warned Ireland, another EU country that offers companies offshore tax status, that it could investigate more companies beyond Apple Inc. as part of its probe into European tax practices.

"The Commission continues to gather information on the tax practices of member states ... and this might lead to new formal investigations," said the official, who declined to be named because of the sensitivity of the matter.

"It would be premature to speculate on whether ... formal investigations could be opened about any specific company."

Luxembourg is used by many multinationals including online retailer Amazon, building equipment maker Caterpillar and UK mobile telecoms group Vodafone.

Pushed by France and Germany, Brussels is keen to clamp down on what it sees as unfair tax competition across the bloc.

If the Commission can prove countries such as Luxembourg and Ireland agree tax treatments that diverge from international rules, it could deem any corporate tax savings to be a form of subsidy that must be halted or even repaid.

In a strongly worded statement in March, the Commission, the EU executive, chastised Luxembourg, saying it had "failed to adequately answer previous requests for information" and ordered it to outline many details of its tax system.

The finance ministry in Luxembourg was not immediately available for comment on Friday, but in June it said it had "doubts about the legality of certain aspects of the European Commission's information requests."

Corporate profit-shifting has come under the international spotlight in recent years following reports of how companies such as Apple use complex structures to slash their tax bills.

>> Read: The Irish loophole behind Apple's low tax bill

A Reuters examination in 2012 of accounts filed by 25 Amazon units in six countries showed how tax arrangements in Luxembourg also allowed the company to avoid paying more tax in the United States, where the company is based.

Tax advisers say Luxembourg has helped attract more than 40,000 holding companies and thousands of high-paying jobs for its population of nearly half a million.

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an european's picture

I have to agree that unfortunately there is a real fighting competition between Europeans because of the lack of common tax politic and here again is that correct for the common European interests ?
By the way I've heard that Luxembourg is rising it's tax rates higher in 2015 !
However other Member-states could drop it and equalize a little bit the inequality !
Or the E.U. (government) can levy several in the E.U. selective sales taxes on the sale or lease of particular goods and services - same tax rates at this level ! Whilst other sale goods remains on local governments power !

mike's picture

As a well-known MEP once said: "Eurocrats themselves are the real tax dodgers" and "[the EU staff] is tax fraud on an absolutely massive scale".

Mike Parr's picture

What a pathetic comment. Trans-national corporations and high net worth individuals dodge billions. Giving some examples:
Barclay brothers (prop Daily VerminGraph oh & EU haters)
Murdoch (prop - The Scum, Times etc oh and EU hater)
Rothermere (prop - Daily Hat (Mail) - oh & EU hater)

I am sure you read their rags - hence your very very stupid comment. Of course it is entirely possible some MEPs dodge taxes - but this falls into the peanut class compared to the real villains.

mike's picture

I am not so sure about the stupidity of my, and the MEP's, comment.
He referred to ALL Eurocrats. That's about 55,000 of them. I.e. a respectable multinational.
They all benefit from a series of tax-free fees and allowances. Their income tax rates is ultra flat and low compared to local income tax rates.
In Brussels, the European institutions are exempted of taxes all other companies have to pay (e.g. a tax that is based on the -no kidding- weight of the company's ICT hardware).

And even if (big if) the Eurocrats aren't dodginng taxes on the same scale as other individuals and/or companies, the principle remains. It is about time Eurocrats start practicing what they preach.

A Londoner's picture

This seems to be a topic where the group of EU G20 countries - France, Germany, Italy, Spain, and the UK together with the US are taking the lead to combat tax avoidance schemes by big multinationals - including Google, Amazon, Starbucks etc. They seem to be sharing information about companies profits and corporation tax. According to the HM Treasury web site 12 other EU governments are co-operating and providing information. So that means 11 EU governments are not co-operating.