Amazon Tax Deal Scrutiny, New Munis, Franc-Surge: Compliance
(Bloomberg) — The European Union stepped up criticism of Luxembourg’s tax pacts, saying the country approved a “cosmetic” deal with Amazon.com Inc. in 11 days, potentially letting the company shift billions of euros to a tax-free unit.
The EU told Luxembourg officials that the deal, based on a “cosmetic arrangement,” gives the Internet retailer an unfair advantage over competitors and could lead to the repayment of any back taxes that are considered illegal state aid. The comments were in a letter sent in October, and released Jan. 16, which outlined the EU’s reasons for starting an investigation.
The probe is one of several the EU is conducting into tax deals national governments struck with companies.
The Luxembourg ruling allows Amazon EU Sarl to pay a tax- deductible royalty to a limited liability partnership that licenses the group’s intellectual property rights but isn’t subject to corporate taxation.
Amazon didn’t provide some details about intellectual property and its underlying assets held by the tax-free unit when the company requested a ruling from Luxembourg in 2003, the EU’s letter said. The tax-deductible royalty payments have enabled Amazon to transfer as much as 500 million euros a year to the unit, according to a person familiar with the case who asked not to be identified as the probe is ongoing.
Seattle-based Amazon said it has received no special treatment from the government.
“We are subject to the same tax laws as other companies operating here,” Drew Herdener, a spokesman for the company in Luxembourg, said in an e-mailed statement.
Luxembourg is “fully cooperating” with the commission, the country’s finance ministry said in a statement Jan. 16.
Compliance Policy
Obama Proposes New Muni Bonds for Public-Private Investments
President Barack Obama is proposing a new class of municipal bonds called Qualified Public Infrastructure Bonds to spur private investment in U.S. infrastructure projects.
The QPIBs wouldn’t expire, and there’d be no cap on issuance, the administration said in a statement Jan. 16 in Washington. The debt also wouldn’t be subject to the Alternative Minimum Tax.
“QPIBs will extend the benefits of municipal bonds to public-private partnerships,” lowering the cost of borrowing and attracting new capital, the administration said in the statement.
Compliance Action
Swiss Financial Regulator Assessing Impact of Franc Surge
Switzerland’s financial markets regulator, known as Finma, is looking into how the record surge on Jan. 15 by the Swiss franc impacted institutions, the regulator said in an e-mailed statement.
Authorities worldwide are assessing how firms handled the fallout of the currency swings.
Banks and currency traders are tallying the fallout after the Swiss National Bank’s unexpected decision to jettison its cap on the franc sent the currency up as much as 41 percent against the euro. FXCM Inc., the largest U.S. retail foreign- exchange brokerage, said client losses threatened its compliance with capital ratios, and brokers in the U.K. and New Zealand were pushed into insolvency.
The Commodity Futures Trading Commission, the main U.S derivatives regulator, is reviewing the situation at FXCM, said Steve Adamske, a CFTC spokesman. The National Futures Association is in touch with the firm and the CFTC, according to Karen Wuertz, an NFA spokeswoman.
The Securities and Exchange Commission is “monitoring developments and discussing them with fellow regulators and market participants,” said John Nester, a spokesman for the agency.
While the SEC doesn’t regulate futures and commodity brokers, it would be interested in any impact the Swiss franc’s move had on businesses it oversees.
The U.K.’s Financial Conduct Authority declined to comment on whether it will investigate the impact of the Swiss franc’s moves.
The Hong Kong Monetary Authority and New Zealand’s Financial Markets Authority also made inquiries regarding the protection of customers following the franc’s surge.
–With assistance from Dave Michaels in Washington, Gaspard Sebag in Brussels, Stephanie Bodoni in Luxembourg and Hugo Miller in Geneva.
To contact the reporter on this story: Carla Main in New York at cmain2@bloomberg.net To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net David Glovin, Andrew Dunn
