The antitrust regulators investigating Amazon's tax agreements with Luxembourg believe the decade-long arrangement may be incompatible with free market rules.
An investigation into Amazon's tax terms with Luxembourg was established in October, following a period of prolonged negative publicity for Amazon (and others, such as Apple and Starbucks) concerning the minimal tax bills it has been paying in the UK.
Now Reuters reports that European Commission antitrust regulators have said the standing agreement effectively amounts to state aid, rendering it unlawful and crucially giving Amazon an unfair advantage over its other competitors in Europe.
"The Commission's preliminary view is that the tax ruling of 5 November 2003 by Luxembourg in favour of Amazon constitutes state aid,” it said. The Commission has doubts at this stage as to that ruling's compatibility with the internal market."
In May it was revealed that Amazon UK paid just 4.2m in tax to the UK treasury in the previous financial year (and 3.2m the year before) despite registering sales to the tune of 4.3bn. That represents a tax rate of 0.1 per cent.
At that point it had only paid 10m in corporation tax over the last ten years, while sales over the last four years have totalled 23bn. It is able to do this as it exploits a tax loophole allowing it to charge sales taxes to Luxembourg and not the UK, where rates are higher.