The European Union's competition authority is opening a formal investigation of Amazon's European corporate income tax practices.
The EU's executive Commission said Tuesday it is probing whether a tax agreement struck between the online retailer and the government of Luxembourg — where Amazon records most of its European profits — does constitute illegal state aid, distorting competition.
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The Commission says a 2003 tax arrangement with Amazon EU Sarl ensures that most of Amazon's profits made in the 28-nation bloc "are recorded in Luxembourg but are not taxed in Luxembourg."
The EU's investigation is part of a wider crackdown on multinationals' ability to avoid taxes by shifting profits and costs between countries. Apple Inc., coffee chain Starbucks and the financial arm of carmaker Fiat are also under investigation.