The European Union’s crackdown on big American technology companies was dealt a blow yesterday as Amazon won a legal battle over the payment of €250 million in back taxes.
The bloc’s General Court ruled that Amazon was not handed an illegal tax deal by Luxembourg, which is home to the company’s European base.
The EU and Britain believe that big American corporations, particularly technology companies, do not pay their fair share of tax in Europe. The companies often have no physical presence in countries, which means that they can route sales through low-tax havens.
Margrethe Vestager, the European Commission’s competition chief, has spearheaded the bloc’s offensive against Big Tech but the Amazon defeat is her second in quick succession after she lost a battle with Apple last year.
In 2017 Vestager accused Amazon of cutting its tax bill by routing European sales through an entity in Luxembourg, which then reduced its tax liability to a quarter of what it should be by paying an “inflated” royalty to a holding company that had no staff or offices. The tax structure penalised by the commission was in place between May 2006 and June 2014, after which it was changed.
Amazon and Luxembourg contended that the company had not received “illegal tax benefits” through the old structure and their actions were legal at the time the arrangement was made.
Yesterday the court said: “The commission did not prove to the requisite legal standard that there was an undue reduction of the tax burden of a European subsidiary of the Amazon group.
“The result is that the contested decision must be annulled in its entirety.”
Vestager said: “Ensuring companies pay a fair share of tax is a marathon, not a sprint. State aid rules apply and selective tax benefits harm competition.” She said she would examine the ruling before deciding whether to appeal.
Amazon said it received “no special treatment” and yesterday’s ruling was “in line with our long-standing position that we followed all applicable laws”.