A European Union court struck down a 2017 European Commission decision ordering Amazon to pay $300 million (250 million Euros) in taxes, saying that regulators failed to prove the company had an illegal advantage and that its analysis was “incorrect in several respects.” The Commission’s executive vice president Margrethe Vestager has spearheaded a campaign against several Big Tech companies, including Apple and Google. It was her second recent defeat after the General Court overturned a 2016 decision against Apple.
The Wall Street Journal reports that Vestager, who also fined Google three times, is considering “possible next steps.” In her campaign against antitrust violations, Vestager has also “filed formal antitrust charges against Amazon and Apple over their treatment of rivals,” both of which are “based on a facet of EU law aimed at creating a level playing field for companies across the bloc by forbidding governments from granting companies some types of state aid.”
Ireland and Luxembourg are two EU companies that have offered so-called sweetheart tax deals to Starbucks, Nike, and Fiat Chrysler (now Stellantis) as well as Amazon. The court sided with Vestager on the Fiat case, but against her in appeals filed by Apple and Starbucks. In the Apple case, “the General Court annulled the tax decision, saying the Commission had failed to meet the legal standards in showing that Apple was illegally given special treatment.”
The EU is now incentivized to create “changes to international tax laws to wring more revenue from big tech firms.” At the same time, the Organization for Economic Cooperation and Development (OECD) is holding talks about “shifting the taxation of Big Tech companies.” Vestager said that the European Commission will “soon put forward its own proposal for an EU-wide digital levy in order to close tax loopholes.”
“We need to seize the momentum to progress towards fair taxation at all levels,” she said.
The Amazon case specifically centers on the company’s strategy, dubbed internally as Project Goldcrest, Luxembourg’s national bird, under which it “funneled all of its e-commerce sales in the EU through an operating company called Amazon EU SARL … [which] paid a significant royalty every year to an untaxed Luxembourg-registered parent called Amazon Europe Holding Technologies SCS, reducing the operating company’s taxable income.”
In 2017, the European Commission “argued that the company had improperly inflated the royalty to eat up the operating company’s profit,” which led to the imposition of the €250 million in “alleged unpaid taxes over an eight-year period.” WSJ adds that, “the U.S. Internal Revenue Service … had also sought as much as $1.5 billion in additional taxes from Amazon over the same set of transactions, but a U.S. tax court sided with Amazon in 2017,” and an appeals court upheld the decision.
CNBC reports that, “European lawmakers are debating two legislative proposals that could bring about sweeping [tax] changes,” with the EU’s aim of enforcing “remedies that will lead to practical changes, rather than fining those that constantly breach the rules.”