News Summary
Amazon can avoid paying about $270 million in back taxes to the European Union after a ruling from the European Court of Justice in favor of the company. The court rejected an appeal from the European Commission, affirming that it did not prove that Amazon’s favorable tax status in Luxembourg was “state aid” prohibited by the EU. This ruling is a setback for the European Commission’s attempt to curb internal tax loopholes in the EU. Amazon’s ruling could set a precedent for Apple, which faces a tax ruling of around $14 billion on similar grounds in Ireland.
Details of the News
Amazon.com has managed to avoid paying about $270 million in back taxes after a ruling from the EU’s highest court in favor of the e-commerce giant on Thursday in a case that could set a precedent for other global tech giants.
The European Court of Justice rejected the European Commission’s appeal, noting in its ruling that “the Commission did not prove that the tax ruling given to Amazon by Luxembourg constituted state aid incompatible with the internal market (of the EU).”
The case dates back to 2017 when the European Commission decided that the tax ruling issued by Luxembourg in 2003 concerning two of Amazon’s subsidiaries there constituted state aid and artificially reduced Amazon’s corporate tax liability.
Luxembourg and Amazon challenged the decision in the General Court, which later issued a ruling in 2021 stating that “the Commission [did not prove…] that the relevant Amazon subsidiary benefited from an unjustified reduction in tax burdens” and that “Luxembourg did not grant a selective advantage” to the company in e-commerce.
The Court of Justice stated in a press release on Thursday that the Commission had incorrectly defined the “reference system” of the laws applicable to the case, as some EU and OECD rules were not part of Luxembourg’s national tax law. Therefore, “the Commission’s decision had to be annulled in any case.”
Speaking to Reuters about the Amazon ruling, Oxfam’s EU tax expert, Chiara Putaturo, said, “The EU must deliver real tax reforms. It can start by not overlooking internal tax loopholes within its borders that allow companies to evade paying their tax bills through empty offices.”
This ruling sets an important precedent for the future as EU antitrust chief Margrethe Vestager tries to curb internal tax loopholes in the EU. Apple (AAPL) faces a tax bill of about $14 billion from the EU due to concerns that Ireland granted the tech company a selective advantage through state aid.
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Article Sources
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European Court of Justice. “Press Release No. 190/23.”
Reuters. “Amazon wins $270 million tax battle in blow to EU’s Vestager.”
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