The tax advantage that the European branch of Amazon enjoys in Luxembourg is legitimate, according to the EU’s General Court. The e-commerce giant therefore does not have to pay back 250 million euros in back taxes.
“No unjustified tax reduction”
European Commissioner Margrethe Vestager ruled in 2017 that Luxembourg had provided illegal state aid to Amazon, which has its European headquarters in the Grand Duchy. Thanks to a favourable tax deal, the retailer does not have to pay tax on three quarters of its profits and therefore paid four times less tax than other local companies. The European Commission had ordered Luxembourg to claim 250 million euros in back taxes plus interest from Amazon. This was not to the liking of Amazon and the Luxembourg government, which took the matter to court.
The judge has now ruled against the EU: the Commission has not proven that there is an undue reduction of the tax burden and Luxembourg does not have to reclaim any tax money from Amazon, reports Reuters. It is a new defeat for the European Commission after its previous unsuccessful attempts to claim 13 billion euros from Apple in Ireland and 25 million from Starbucks in the Netherlands.
Last week it became known that Amazon did not pay one eurocent of tax in Europe last year, and this despite the fact that its turnover increased by 12 billion euros to 44 billion euros. Officially, the company made a loss of 1.2 billion euros. In addition, Amazon was granted 56 million euros in tax credits, which it can deduct from any future profits. The tax avoidance strategy has angered some politicians, consumers and fellow retailers.
