The European Commission is widening its probe into how multinationals use countries like Luxembourg to cut their taxes, an official knowledgeable on the matter said.
The Commission has warned Ireland, an EU country that offers companies offshore tax status, that it could investigate more companies beyond Apple Inc 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.
Luxembourg Prime Minister Xavier Bettel was asked by journalists on Friday whether the country had been requested to provide information about Amazon, but he declined to comment.
“We cooperate closely with the Commission and talk directly to the Commission representatives... and we are absolutely confident that rules we apply are in line with European rules,” he said.
Pushed by France and Germany, Brussels is keen to clamp down on what it sees as unfair tax competition in the EU. If the Commission can prove that countries like Luxembourg and Ireland offer tax treatments that diverge from international rules, it could deem 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 chastised Luxembourg, saying it had “failed to adequately answer previous requests for information” and ordered it to outline many details of its tax system. Earlier, the Finance Ministry in Luxembourg said it had “doubts about the legality of certain aspects of the European Commission’s information requests”.
Corporate profit-shifting has come under the spotlight in recent years following 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.