Amazon Wins Tax Appeal Against European Commission


Europe tax setback? EU’s General Court rules the European Commission failed to prove Amazon enjoyed an illegal tax advantage from Luxembourg

Amazon has won its appeal against the European Commission, which had ordered the e-commerce to pay 250 million euros ($303 million) in back taxes.

The EU’s general court said that the commission, the EU’s executive arm, had failed to prove that there was an illegal tax advantage given to Amazon by Luxembourg, where Amazon has its European headquarters.

The issue of American firms using certain low tax European nations such as Ireland or Luxembourg to base their operations, has long been a bug bear for the European Commission and European governments.

Image credit: Amazon
Image credit: Amazon

Back taxes

In 2019 for example, Amazon was accused of paying less tax in the UK over a 20 year period, than some major UK retailers pay in a single year.

That came after an investigation found thatAmazon UK Services paid £61.7m in UK corporation tax over a 20 year period, during which time it achieved £7bn in total revenues over the two decades.

But because Amazon directs most of its European sales via its Luxembourg HQ, it pays very little tax.

According to CNBC, the European Commission alleges that in 2017, Amazon was granted undue tax benefits by Luxembourg.

Indeed, the EC alleged that Amazon was allowed to pay four times less tax than other local companies subject to the same national rules.

Amazon of course disputed that assessment and has welcomed the court ruling in its favour.

“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,” a spokesperson for the company told CNBC via email on Wednesday.

However this is unlikely to be the end of the matter, as the European Commission can opt to appeal the court ruling and take the case to the EU’s highest court.

Track record

The European Commission however is not enjoying much success in its pursuit of US firms paying tax.

In July last year, Europe’s second-top court rejected an EU order that Apple had to pay 13 billion euros ($11.8bn) in Irish back taxes.

The Commission however is appealing that ruling – strongly suggesting that it will follow the same process with the Amazon ruling.

This is not the only trouble Amazon is facing in Europe. In November last year the EC also filed a statement of objections against Amazon on another matter, alleging that Amazon used data on third-party sellers that use its marketplace in order to gain a competitive advantage.