Recent developments include Advocate General Juliane Kokott’s recommendation against Amazon paying 250 million euros ($268 million) in back taxes to Luxembourg. Kokott is a counsel for the EU Court of Justice (CJEU). Kokott identified flaws in the evaluation made by the European Commission and stated that the General Court’s decision to invalidate the EU decision should stand. The case, the parties, and the possible consequences of the CJEU’s decision are all covered in detail in this article.
Credits: Reuters
Background: Amazon’s Tax Arrangement and EU Commission’s Decision
The international e-commerce giant Amazon was accused by the European Commission of failing to pay taxes on a sizable amount of its earnings from EU operations. Due to a tax arrangement in Luxembourg, Amazon was able to divert profits to a holding company that was exempt from paying taxes. This arrangement was considered to be unlawful state aid by the EU antitrust police, who also ordered Amazon to pay 250 million euros in unpaid taxes in 2017.
Advocate General’s Critique of the EU Commission’s Decision
The EU Commission’s judgement is contested in the non-binding judgement of Advocate General Juliane Kokott. She claims that the Commission erred when it came to the conclusion that Luxembourg had illegally provided state aid to Amazon in the form of tax breaks. Kokott further criticises the Commission for determining selective advantage in accordance with the OECD Transfer Pricing Guidelines rather than Luxembourg legislation. She agrees with the General Court’s 2021 ruling, which struck down the EU decision and dealt EU competition commissioner Margrethe Vestager a setback in her campaign against preferential tax arrangements.
The Significance of the CJEU’s Ruling:
The CJEU is anticipated to make its decision in the upcoming months. The CJEU is renowned for generally adhering to the recommendations of its advocates general. The General Court’s ruling would be strengthened if the CJEU supports Kokott’s suggestion, which would also be a setback for the European Commission’s efforts to pursue multinational corporations that have engaged in advantageous tax arrangements. It is crucial to keep in mind, nevertheless, that the CJEU frequently takes several aspects into account when rendering its final judgement, thus its decision can differ from the advocate general’s position.
Companies Involved: Amazon and Luxembourg
Global e-commerce giant Amazon has come under fire for its tax policies in a number of countries. The small European country of Luxembourg has drawn multinational enterprises because of its advantageous tax laws, which include the use of holding companies as a means of profit-channeling. The Luxembourg court’s decision to invalidate Amazon’s tax arrangement underscores larger worries about multinational corporations abusing legal loopholes to reduce their tax liabilities.
Possible Impact of the CJEU’s Ruling:
The EU Commission may be unable to challenge tax agreements between member states and multinational corporations in the future if the CJEU upholds Kokott’s recommendation. This would make it simpler for multinational firms to justify their tax policies, which might result in lower tax obligations and more complicated cross-border tax regulation inside the EU. The decision may also serve as a catalyst for discussions among EU member states to review and possibly harmonise their tax laws in order to stop multinational firms from evading taxes and to provide a level playing field.
Conclusion:
The EU Commission’s attempts to oppose preferential tax arrangements as well as the tax policies of multinational firms operating within the European Union will both be significantly impacted by the CJEU’s imminent decision in the Luxembourg tax dispute involving Amazon. The non-binding opinion from Advocate General Juliane Kokott calls into question how state aid was evaluated and whose standards were utilised. The decision of this case will undoubtedly influence the future framework for international taxes and have wider ramifications for EU tax laws and competition rules.
