Amazon wins court fight against €250 million EU tax order

Commission's executive vice-president Margrethe Vestager. [European Commission]

Amazon won on Wednesday (12 May) its fight against an EU order to pay about €250 million euros in back taxes to Luxembourg, as Europe’s second-highest court dealt a blow to the bloc’s efforts to make multinational corporations pay more taxes.

The Luxembourg-based General Court said the online retail giant had not enjoyed a selective advantage in its tax deal with the Grand Duchy.

“The Commission did not prove to the requisite legal standard that there was an undue reduction of the tax burden of a European subsidiary of the Amazon group,” the judges said.

Amazon welcomed the ruling in a statement, saying it was in line with its “long-standing position that we followed all applicable laws and that Amazon received no special treatment”.

The Commission said in 2017 that Luxembourg had spared the company from paying taxes on almost three-quarters of its profits from EU operations by allowing it to channel profits to a holding company tax-free.

Since then, Amazon’s fortunes have soared. The U.S. online retailer reported $8.1 billion in first-quarter profits, a record, as consumers turned to it for their shopping needs during the pandemic and businesses paid it more to warehouse and advertise their products.

The Amazon decision represents a blow for European Competition Commissioner Margrethe Vestager, who has used the bloc’s state aid rules to tackle sweetheart tax deals between multinationals and EU countries.

Vestager’s victory on Engie case

Vestager has a mixed record so far in her fight against taxation deals the Commission regards as unfair.

In a separate case on Wednesday, French utility Engie lost its appeal against an EU order to pay back taxes of €120 million to Luxembourg.

In its 2018 decision, the Commission said the arrangement between Engie and Luxembourg authorities artificially reduced the company’s tax burden, which meant it paid an effective corporate tax rate of 0.3% on certain profits in Luxembourg for about a decade.

The court sided with the Commission on Wednesday, saying the French utility had benefited from a tax advantage.

“It cannot be disputed that the Engie group received preferential tax treatment owing to the non-application, in the contested tax rulings, of the provision relating to abuse of law,” the Luxembourg-based General Court said.

But the win against Engie pales beside last year’s setback when the General Court threw out Vestager’s order to Apple to pay €13 billion in Irish back taxes. The Commission appealed against that decision in September.

Vestager has, however, successfully made Ireland, Luxembourg, the Netherlands, and Belgium change their tax ruling practices, and spurred the Organisation for Economic Cooperation and Development (OECD) to aim for a global deal on how multinational companies are taxed.

The OECD said last week that the chances of a global deal had never been higher.

[Edited by Zoran Radosavljevic]

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