Amazon.com share price down, EU probes 2003 Luxembourg tax deal

Amazon.com Inc. will face a close investigation by EU authorities of its 2003 Luxembourg tax deal following suspicions that the U.S.-based online retailer shifted its profits in order to avoid taxes.

European Commission Vice President Joaquín Almunia, who is in charge of competition policy, said in an interview, which was cited by Bloomberg: “What is unusual is that the tax ruling contains a cap on the tax base. In other words, Luxembourg’s tax authorities agreed to limit the proportion of Amazon’s turnover that is being taxed in Luxembourg.” Mr. Almunia also explained that most of the companys profits “are recorded in Luxembourg but are not taxed in Luxembourg”.

Amazon is not the only U.S.-based company, which is facing a formal probe by the European Union. EU regulatory authorities have already started investigations on Apple Inc. and Starbucks Corp. The Union revealed that it was concerned that the Luxembourg tax deal, which is still active, lowers the tax payments of the U.S.-based online retailer.

One of Amazons spokesmen said in a statement, which was cited by the Wall Street Journal: “We are subject to the same tax laws as other companies operating here.”

Luxembourg has been long criticized by some analysts, who accused the country in applying a more informal and tolerant system of rulings, although some of them were tightened several years ago. The country, however, did not admit any special treatment.

As reported by the Financial Times, the Finance Ministry of Luxembourg shared that it provides full cooperation with the probe started by the European Union, saying that it was “confident that the allegations of state aid in this case are unsubstantiated and that the commission investigation will conclude that no special tax treatment or advantage has been awarded to Amazon.”

Amazon.com Inc. settled 1.62% lower on Tuesday on the Nasdaq to close at $316.98 per share, marking a one-year change of +4.53%. The company is valued at $146.46 billion. According to CNN Money, the 36 analysts offering 12-month price forecasts for Amazon.com Inc. have a median target of $400.00, with a high estimate of $460.00 and a low estimate of $325.00. The median estimate represents a +26.19% increase from the last price of $316.98.