The European Commission has released a document today (January 16th) saying that in its "preliminary view" the agreement made between Luxembourg and Amazon in 2003 "constitutes state aid."

Both sides say that they didn't do anything wrong

Amazon said that it "has received no special tax treatment from Luxembourg", adding that they "are subject to the same tax laws as other companies operating here [in Luxembourg]."

Luxembourg's finance ministry has said that it is fully cooperating with the Commission's investigation, and that: "Luxembourg is confident that the state aid allegations in this case are without merit and will be able to convince the Commission of the legitimacy of the anticipatory decision in question and that no competitive advantage was granted."

Rushed deal

The Commission points out that the deal was put together over 11 working days - this is described as "a very short period of time." It has also raised objections concerning the methods used to calculate Amazon's tax liabilities, and it says that Luxembourg did not provide economic analysis to explain these calculations.

This is part of a much bigger story

The country's tax arrangements have been under fresh scrutiny since The International Consortium of Investigative Journalists (ICIJ) published a series of stories based on a cache of 28,000 leaked documents that journalists obtained. The stories published in November of last year outlined what appears to be mass tax-avoidance in the small EU country.

These 'LuxLeaks' implicated over 300 companies - including IKEA, Pepsi, FedEx, Dyson, Burberry, AIG, Deutsche Bank and Ireland’s Glanbia and the Sisk construction business family.

The European Commission has said that it will be able to use these leaked documents as part of future investigations into the country's tax affairs.

It goes to the top of the EU

This decision will increase pressure on the President of the European Commission - Jean-Claude Juncker. He was the prime minister of Luxembourg between 1995 and 2013. This means that he was leading the country when most of these alleged agreements were reached.

In 2003 Mr Juncker publicly took credit for convincing Amazon to come to Luxembourg.

While he has taken full responsibility for the tax deals reached under his premiership - he has also claimed that he was “not the architect of what you could call the Luxembourgian problem.”

Irish implications

The Commission is currently probing Ireland's tax arrangements with Apple - a ruling in this case is expected to come during the first half of 2015.

The EU’s Competition Commissioner, Margrethe Vestager has said that its examination of Apple's tax payments in Ireland is one of the Commission's top priorities. 

Minister for Finance, Michael Noonan has constantly stated that Apple's tax dealings in Ireland are legal. He also previously expressed his belief that the EU would drop the case.