The European Union’s highest court ruled in favor of Amazon on December 14, stating that the e-commerce giant did not violate EU law in securing a €250 million discount on its tax bill from Luxembourg authorities. The European Commission had argued that Amazon employed a complex corporate structure involving royalty payments to a shell company, allowing it to avoid taxes on three-quarters of its European profits over nearly a decade.
Amazon’s Cost Reduction Strategy
Amazon’s tax-saving strategy involved negotiating a significant discount through royalty payments to a shell company, effectively detaxing a substantial portion of its European profits. The European Commission, responsible for antitrust enforcement, contended that this arrangement provided Amazon with an unfair advantage and constituted a violation of EU law. However, the General Court had previously determined that the deal did not amount to an unlawful subsidy.
Legal Ruling Challenges EU State Aid Enforcement
The recent ruling by the Court of Justice poses a setback for the European Union’s efforts to combat multinational tax avoidance through its state aid enforcement powers. This decision follows previous losses in similar cases involving Engie, Starbucks, and Fiat. The EU’s pursuit of a €13 billion case against Apple is still pending, reflecting ongoing challenges in addressing complex fiscal arrangements used by multinational corporations.
LuxLeaks Revelations and Impact on EU Tax Policy
The LuxLeaks revelations in 2014 exposed a series of intricate fiscal arrangements, including Amazon’s, leading to scrutiny of Luxembourg’s tax practices. The current ruling by the Court of Justice indicates a divergence from international tax norms, asserting that they do not constitute part of EU law. This position challenges the previous decision of the General Court in 2021.
Commission’s Approach Criticized, Outcome Implications
While the Court of Justice ruled against the European Commission, it also criticized the Commission’s methodology, stating that it had employed an incorrect reference system to determine if Luxembourg had granted an unlawful carve-out from its standard rules. The outcome of this case holds implications for the ongoing debate surrounding multinational corporations’ tax practices and the EU’s ability to enforce state aid rules effectively. As of now, representatives from Amazon.com and the Commission have not provided immediate comments.
SOURCE: Ref Image from RTE
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