EU widens tax investigation into multinationals - source

Friday 04 July 2014 18.00
Probe into how multinationals use countries such as Luxembourg to cut their tax bill may be widened
Probe into how multinationals use countries such as Luxembourg to cut their tax bill may be widened

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 has said.

Last month, the Commission warned Ireland, another EU country that offers companies offshore tax status, that it could investigate more companies beyond Apple 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," the official said. 

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

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.

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

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 US, 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.