Microsoft taxes face scrutiny

Amid a global crackdown on tax avoidance, EU competition regulators last month opened a probe into suspected tax breaks for Apple Inc. in Ireland, Starbucks Corp. in the Netherlands and Fiat Finance & Trade SA in Luxembourg.

Microsoft Corp, the world’s biggest software maker, is among companies embroiled in a European Union inquiry into Luxembourg’s tax treatment of multinational firms, according to three people familiar with the EU’s review.

The European Commission has quizzed Luxembourg about how it taxes Microsoft’s intellectual property, said one of the people, who asked not to be identified because the matter is private. Competition regulators also asked questions about McDonald’s Corp.’s taxes in Luxembourg, two of the people said.

Amazon.com Inc.’s tax affairs there are also being looked at, the Financial Times reported yesterday, citing an EU official.

Amid a global crackdown on tax avoidance, EU competition regulators last month opened a probe into suspected tax breaks for Apple Inc. in Ireland, Starbucks Corp. in the Netherlands and Fiat Finance & Trade SA in Luxembourg, the bloc’s richest country in per capita terms.

“We are in constant contact with the European Commission on all these tax issues and Luxembourg is pretty confident in the way it handles its taxation issues and so we’re going to monitor the information with the commission and hand over the information that is requested,” Pierre Gramegna, Luxembourg Finance Minister, said today on CNBC.

The scrutiny of Luxembourg is also a potential embarrassment for Jean-Claude Juncker, who is primed to become the next president of the commission — the EU’s executive arm in charge of the investigation. Juncker, who led Luxembourg until last year, helped the country win a reputation as an attractive location for international companies.

McDonald’s denied earlier this year a magazine report that it avoided paying taxes related to more than US$3 billion of revenue in France since 2009, saying inspections by fiscal authorities at its French unit were routine.

The EU’s investigations of Apple, Starbucks and Fiat Finance focus on so-called transfer-pricing arrangements on taxing commercial transactions between company units.

The commission has said it will continue a wider inquiry into those deals, including information gathering from the U.K., Belgium, Cyprus and Malta. Governments can be ordered by the European Commission to claw back unfair aid.

The EU has also sought details from Belgium, Spain, France, Hungary, Luxembourg, the Netherlands, the U.K., Cyprus and Malta on so-called patent boxes, which allow tax reductions on income from patents.

The EU request for information on Amazon relates to whether Luxembourg’s tax decisions on the company complied with state- aid rules, the FT said. Amazon’s press office in the U.K. didn’t respond to a call for comment.