Amazon wins court fight against $303-million EU tax order

Amazon on Wednesday, May 12, won its fight against an EU order to pay about 250 million euros ($303 million) 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 tax.

The Luxembourg-based General Court said Amazon 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 judge said.

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

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

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 euros ($145.7 million) to Luxembourg.

But the win against Engie pales beside last year’s setback when the General Court threw out Vestager’s order to iPhone maker Apple to pay 13 billion euros ($15 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.

The European Commission in its 2017 ruling, knocked down on Wednesday, said Luxembourg spared Amazon 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 the 2017 ruling, 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.

In its 2018 decision on Engie, the EU said the arrangement with 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, saying the French utility had benefited from a tax advantage.

The cases are T-816/17 Luxembourg v Commission & T-318/18 Amazon EU v Commission. – Rappler.com