Amazon's Rapid Rise Put Online Giant on EU's Tax Hit List

(Bloomberg) -- Amazon.com Inc. is in the European Union’s cross hairs because its rapid expansion may have been fueled by tax measures that slashed its costs, according to the EU official spearheading a state-aid probe into the online giant.

Gert-Jan Koopman, whose department at the European Commission was responsible for slapping Apple Inc. with a 13 billion-euro ($15.6 billion) tax repayment order last year, told a Brussels conference that the EU is targeting methods that are a menace to fair competition.

"We are concerned that a company that is essentially in the position to lower its tax base, and as a business model is penetrating markets and scaling up, can do so more rapidly than some of its competitors,” Koopman said when asked about the EU’s investigation into Amazon. He pointed to an “internal form of financing which allowed it to expand very significantly."

Amazon and burger chain McDonald’s Corp. are tipped to be the next in line as the EU clamps down on tax deals it deems to be unfair. Both are under investigation for their fiscal arrangements with Luxembourg, which has gained a reputation for doling out special deals to big firms in the Grand-Duchy.

At stake in the EU’s probes are billions of euros that multinational companies have squirreled away in tax havens, out of the reach of authorities in the countries where they make most of their sales. Faced with some 300 companies to look at, the EU can prioritize cases that may harm competition more widely, said Koopman.

Picking Cases

"On terms of picking up our cases and assessing our priorities these things are very important" since regulators have limited resources and want to focus on tax deals that gave a "selective advantage" to one company over rivals, he said.

Amazon, which has also incurred the wrath of U.S. President Donald Trump over taxes, and McDonald’s both declined to offer a response to Koopman’s comments.

The EU started a flurry of investigations into companies’ tax affairs when it began a formal probe of Apple’s deals with Ireland in 2014. It followed with inquiries into Starbucks Corp., a Fiat SpA unit, Amazon, McDonald’s, Engie SA and a wider investigation into a Belgian tax program that gave more than 30 multinational companies special tax treatment.

Both Luxembourg and Ireland have buckled under the pressure, moving to change tax arrangements that attracted criticism. Pierre Gramegna, Luxembourg’s finance minister, met EU Competition Commissioner Margrethe Vestager on Sept. 4, months after the country tightened its tax rules for corporations.

EU enforcement isn’t set to slow down and "the story is not over," said Koopman. "We are maybe at the end of the beginning but we are certainly not at the end" of EU tax investigation.

To contact the reporter on this story: Aoife White in Brussels at awhite62@bloomberg.net.

To contact the editors responsible for this story: Peter Chapman at pchapman10@bloomberg.net, Molly Schuetz