Amazon has joined an ever growing line of big corporations being investigated for tax avoidance by EU regulators. As Melanie Ralph reports some believe the European Commission's action could have a damaging impact on the region's stuggling economy.
First Starbucks, then Apple and now Amazon is under investigation over tax avoidance in Europe. The online retailer is being accused of striking tax-minimising deals with EU members that MAY break the bloc's rules. Joaquin Almunia is the European Commission's Vice President. (SOUNDBITE) (English) VICE-PRESIDENT OF THE EUROPEAN COMMISSION IN CHARGE OF COMPETITION, JOAQUIN ALMUNIA, SAYING: "What we want to find out by launching this probe is whether the tax authorities of Luxembourg have been too accommodating to Amazon in applying transfer pricing rules. More precisely, we are looking at whether selective tax advantages have been granted to a particular company." Amazon is structured so all online sales in Europe are technically between customers and a Luxembourg company. So despite racking up 14 billion euros of sales each year, Amazon's main European subsidiary, Amazon EU Sarl, reports almost no profit. It does pay hefty fees to its immediate parent - but that's a tax exempt partnership. The Commission is looking at the 2003 deal that underpins that arrangement. It's all about favourable treatment - earlier this month it was Apple's tax arrangements in Ireland making headlines. And Starbucks has been criticised over an agreement in the Netherlands. CMC's Michael Hewson says the European Commission needs to be careful. SOUNDBITE) (English) CMC MARKETS, ANALYST, MICHAEL HEWSON, SAYING: "There are questions to answer with respect to what I call tax avoidance, but tax avoidance, to all intense and purposes is not illegal. It's really up to the EU to simplify the tax regime within its borders, come to an agreement with these US companies so that they're encouraged to actually invest in a Europe that at the moment needs all the inward investment it can get." The investigation has another dimension too. Jean-Claude Juncker - will become the Commission's President next month. He was Luxembourg's Prime Minister when the Amazon deal was agreed.