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In a major setback to the EU’s efforts to get more taxes from tech companies, Europe’s second highest court has ruled that Amazon does not have to pay €250million (£215 million) in back taxes to Luxembourg. Europe’s General Court overturned a 2017 ruling by the European Commission, which concluded that a tax deal between Amazon and the government of Luxembourg in 2006 amounted to illegal state support. 15 years ago, Luxembourg convinced Amazon to shift its collection of profits across much of Europe to the Grand Duchy.
The court now said the competition regulators had failed to prove that Amazon received an illegal advantage from the tax rulings, adding that the Commission was “incorrect in several respects”.
The online retailer welcomed the decision and said in a statement: “We welcome the Court’s decision, which is in line with our long-standing position that we followed all applicable laws and that Amazon received no special treatment.
“We’re pleased that the Court has made this clear, and we can continue to focus on delivering for our customers across Europe.”
The ruling is a serious blow to the Commission’s efforts to curtail what it sees as abusive tax structures perpetrated by multinational enterprises (MNEs).
The ruling is a serious blow to the Commission’s efforts to curtail what it sees as abusive tax structures perpetrated by multinational enterprises (MNEs) .
According to financial columnist and author Matthew Lynn, though, it also highlights two significant problems within the EU.
He explained: “The first is that, as so often, the EU is engaged in a power grab.
“It harbours ambitions for centralised control of tax, and corporate taxation in particular, but its members won’t agree to that.
“So instead, it uses state aid rules, arguing that tax breaks amount to a subsidy.
“Of course, that is nonsense.
“Sovereign states are perfectly entitled to set their own taxes, and a lower rate is simply fair competition, not state aid.
“The courts are always going to uphold that because, well, that’s what the law says.”
The second problem, Mr Lynn wrote, is that the EU operates increasingly outside the rule of law itself.
He added: “It likes to dress itself up as a rules-based organisation.
“”But increasingly – and as we saw with its bizarre decision to seize control of vaccine production – it ignores the law whenever it suits. In fact, it increasingly rules instead by bureaucratic fiat.
“It can’t even win cases in its own courts, never mind any others.
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“In truth, it is an increasingly rogue organisation – but at least it won’t now have an extra £200 million from Amazon to fund its ambitions.”
The Amazon ruling was the third time that EU judges said the commission had failed to demonstrate that a multinational company benefited from state aid.
A multimillion-euro case against Starbucks coffee company was overturned in 2019.
And the Commission is appealing against a decision made at the EU’s second-highest court – the General Court – last year, that ruled in Apple’s favour.
The appeal will be heard at the European Court of Justice, the EU’s highest court.
This month, The Guardian revealed that Amazon paid no corporation tax in Luxembourg last year despite collecting record sales income of €44billion (£41bn) in its holding company in the Grand Duchy.
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Those sales were collected in Luxembourg despite being for goods sold to millions of households in other European countries, including the UK.
Chiara Putaturo, Oxfam’s EU tax expert, told the publication: “Amazon has seen its profits soar during the pandemic – a record €44bn (£41bn) in European sales alone.
“Yet their tax returns filed in Luxembourg showed no tax was paid.”
An Amazon spokesperson responded to The Guardian’s findings, saying: “Amazon pays all the taxes required in every country where we operate.
“Corporate tax is based on profits, not revenues, and our profits have remained low given our heavy investments and the fact that retail is a highly competitive, low margin business.
“We’ve invested well over €78billion (£67.1bn) in Europe since 2010, and much of that investment is in infrastructure that creates many thousands of new jobs, generates significant local tax revenue, and supports small European firms.”
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