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The European Union has released its report into the tax rulings that affected Amazons business affairs in Luxembourg and they announce that they think that this might have amounted to state aid. Do please note that this is still might: they are calling for further evidence on the matter. Theres a few points that should be made about this perhaps the most prominent being that this is absolutely nothing at all to do with the usual tax complaints about Amazon. Margaret, Lady Hodge, burbling on about how Amazon doesnt pay tax in the UK, Richard Murphy, the Tax Justice Network shouting about the same things: nothing to do with this at all. This is purely a Luxembourg matter. The other prominent thing to note is that no, there will not be any fines of anyone over this. There never are fines in state aid cases: all that might happen is that the tax not paid must now be paid. Given that this would then reduce Amazons US tax bill by exactly the same amount its not an issue of very great import.

The FT has the basic news:

Luxembourgs unorthodox tax deal with Amazon was laid bare by European Commission investigators on Friday, who believe it artificially lowered and capped the online retailers tax bill, in breach of EU law.

In a 23-page letter outlining preliminary conclusions from its probe, Brussels alleges that the Amazons European hub was founded on a favourable and selective treatment that amounts to an illicit state subsidy, which may need to be clawed back.

The WSJ has a similar report:

Amazon.com Amazon.com Inc. s tax arrangements in Luxembourg may violate European Union law and give the U.S. company an illegal advantage over competitors, EU regulators said Friday, in a preliminary decision that lays out the rationale for launching a detailed investigation three months ago.

The probe is part of a broader crackdown on tax avoidance by multinationals in Europe, where governments are scrambling to shore up their revenues and assure citizens that everyone is contributing fairly to crisis-hit budgets. Amazon could be required to pay back large sums in back taxes if the regulators suspicions are confirmed.

The effect on Amazons finances could well be a great deal smaller than is being assumed there. The actual report itself can be read here.

Stripped of all of the complexity so beloved of lawyers and taxmen the issue is really quite simple. Amazon sells everything across the EU from Luxembourg. Its various warehouses and logistics chains across the continent are just that, warehouses and logistics chains and under the standard tax treaties these do not create a permanent establishment in the countries they are in. As the establishment of a PE is a vital precondition (and warehouses are specifically excluded in the legislation from creating a PE) of being subject to corporate taxation in a country then all of the taxes due on profits from EU sales pile up in Luxembourg and are taxed as that state decides they should be.

This case and investigation is nothing at all to do with any of that. The basic and essential structure of Amazon is not under question in any manner here. A Luxembourg company has the absolute right to sell right across Europe and to pay corporate taxes only in Luxembourg. This really is nothing at all to do with the whines of people like UKUncut or Margaret, Lady Hodge.

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Amazon's Tax Dodging In Luxembourg Might Have Been State Aid Says European Union