EU judges have overturned a European Commission order to Amazon to pay back €250m in taxes to Luxembourg, in a further blow to Brussels’ efforts to curb sweetheart national tax deals.
The ruling follows a heavy defeat for the commission last year when judges quashed its landmark state aid finding that Apple owed Ireland €14.3bn in taxes and interest. The EU executive on Wednesday won a separate ruling over its decision to force Engie, the French utility company, to pay €120m in back taxes.
The two judgments handed down on Wednesday by the General Court, the EU’s second highest court, both related to agreements between the businesses and Luxembourg which the commission said amounted to illegal state aid.
Despite the legal defeats, Brussels is stepping up its campaign against bespoke corporate tax deals in the EU, as pressure builds for companies and wealthy individuals to bear more of the fiscal burden for recovery from the economic havoc wrought by the pandemic.
Margrethe Vestager, EU competition commissioner, said both rulings confirmed the principle that national taxation laws had to be in line with EU state aid rules and she hinted at the international momentum following the Biden administration’s support for a global minimum corporate levy.
“We are close to achieving a historic global agreement on the reform of the international corporate tax framework. Moreover, the commission is in the process of putting forward a proposal for a digital levy, so that companies benefiting from the digital single market fairly contribute to the EU budget,” she said.
In its judgment on Amazon, the court said the commission was “incorrect in several respects” in its analysis of the 2017 case, including that the company’s tax bill was artificially reduced as a result of overpricing of a royalty payment.
The online retailer and the Luxembourg government said they were pleased with the ruling. The company added that the case related to historical tax arrangements ended in 2014.
“We welcome the court’s decision, which is in line with our longstanding position that we followed all applicable laws and that Amazon received no special treatment,” it said.
But Oxfam, the anti-poverty campaign charity, decried the judgment as a “blow” to efforts to force companies to pay a fair share and to stop Luxembourg acting as a “tax haven in the heart of Europe”
“The pandemic is pushing people into poverty, while pandemic profiteers, like Amazon and [its founder] Jeff Bezos, continue to see their wealth sail without paying their fair share of tax,” said Chiara Putaturo, an EU tax specialist at Oxfam.
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. The Commission is appealing against last year’s Apple decision at the European Court of Justice, the EU’s highest court.
The EU General Court did side on Wednesday with the commission in its pursuit of Luxembourg’s tax arrangement with Engie, which was formerly known as GDF Suez. Brussels had in 2018 ordered Luxembourg to claw back €120 million of alleged illegal state aid from the company.
The court rejected Luxembourg and Engie’s arguments that the commission had over-reached and pursued “tax harmonisation in disguise”.
“It cannot be disputed that the Engie group received preferential tax treatment,” the court said, adding that the commission brought enough evidence to support its claim that the law had been breached.
The Luxembourg government said it would study the judgment “with diligence”.
Tove Maria Ryding, tax co-ordinator at the European Network on Debt and Development campaign group, said that the opposing court rulings show the difficulty of using state aid legislation to collect taxes.
“We urgently need to start treating the underlying disease, which is a deeply outdated and ineffective corporate tax system,” she said.