European Commission widens probe into how multinationals cut tax bills

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 said yesterday.

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,” said the official, who declined to be named because of the sensitivity of the matter. “It would be premature to speculate on whether . . . formal investigations could be opened about any specific company.”

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 repaid.

In a strongly worded statement in March, the Commission chastised Luxembourg, saying it had “failed to adequately answer previous requests for information” and ordered it to outline many details of its tax system.

The finance ministry in Luxembourg was not immediately available for comment on Friday, but in June it said it had “doubts about the legality of certain aspects of the European Commission’s information requests”.

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