European Court to Decide if Amazon Owes $277 Million in Taxes

LUXEMBOURG (CN) – Amazon and the European Commission wrapped up two days of hearings before the European Union’s second-highest court on Friday in a tax case worth hundreds of millions of dollars.

“The purpose of transfer pricing is to try to treat the transaction as though they are independent parties,” Amazon lawyer Aleksander Tombiński said during questions from the five-judge panel of the European General Court.

(AP Photo/Ted S. Warren, File)

Tombiński, of the international law firm Clifford Chance, was referring to a practice in which companies transfer intellectual property between subsidiaries. Under EU regulations, Amazon should have charged itself a fair market price, or what it would have charged a separate company.

The case dates back to a 2003 tax arrangement that, according to the European Commission, allowed Amazon to dramatically reduce its tax liability in Luxembourg. In 2017, after three years of investigation, the EU’s cabinet body reached the conclusion that Luxembourg gave Amazon a sweetheart tax deal in an arrangement called Project Goldcrest, named after the country’s national bird.

“Luxembourg gave illegal tax benefits to Amazon. As a result, almost three quarters of Amazon’s profits were not taxed,” the EU’s competition commissioner Margrethe Vestager said in an October 2017 statement.

Amazon contested the decision, which ordered the retail giant to pay Luxembourg 250 million euros ($277 million) in back taxes.

The hearing kicked off Thursday, with the commission’s lawyer Paul-John Loewenthal objecting to filings made by Luxembourg. He claimed the country changed its legal arguments after seeing Amazon’s submissions.

Most of Friday’s session was taken up by both sides addressing the commission’s multiple sets of arguments over Amazon’s subsidiaries.

“All of these arguments have been put forward to us,” Loewenthal said in defending the commission’s choice to provide second, third and fourth arguments in support of its case.

“Should we pick the one that suits us best?” quipped Marc van der Woude, head of the General Court panel.

The mood in the courtroom was jovial despite the serious allegations at hand, including an extended running joke as to whether the Luxembourg-based court would be able to reach a decision in time for the Easter recess.

“I don’t think it will be before Easter,” van der Woude said at the end of Friday’s hearing.

Under its competition commissioner, Vestager, the EU has brought a number of similar complaints against multinationals over the last few years, most notably a whopping $14.3 billion fine against Apple in Ireland.

The EU’s concern is that the 27 members of the political and economic union will undercut one another in granting beneficial tax arrangements to large corporations.

A decision in the Amazon case is expected later this year and either side can appeal the ruling to the EU’s highest court, the European Court of Justice, which is considered likely to happen.

“It is the inevitable outcome of any decision,” said Loewenthal.

Amazon employs more than 2,000 people at its European headquarters in Luxembourg City, making it one of the largest employers in a country with a population of just over 600,000.

In a statement, a company spokesperson said: “Amazon pays all the taxes we are required to pay in every country where we operate.”

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