European Commission closes three failed state-aid investigations over tax rulings for Amazon, Fiat and Starbucks
The European Commission has finally admitted defeat after years of trying to prove that three big name entities had unfairly profited from special low tax conditions in certain countries.
The European Commission announced on Thursday that it has “closed three in-depth State aid investigations into transfer pricing tax rulings granted by Luxembourg to Fiat and Amazon, and by the Netherlands to Starbucks.”
The fact that Amazon does not have to pay any back taxes, comes after the Commission was legally defeated in European courtrooms in all three cases.
Amazon tax
In December 2023 for example, the Luxembourg-based Court of Justice of the European Union (CJEU) ruled “that the Commission has not established that the tax ruling given to Amazon by Luxembourg was a State aid that was incompatible with the internal market.”
That ruling by the EU’s top court was final, which effectively ended the long-running legal battle over tax arrangements between Amazon and Luxembourg. But that still left the investigation open on paper – until now.
“In 2015 and 2017, the Commission found that Luxembourg granted selective tax advantages to Fiat and Amazon, and the Netherlands to Starbucks, in breach of EU State aid rules,” said the Commission this week.
“In each case, the Commission found that a tax ruling issued by the respective national tax authority artificially lowered the tax paid by each company and therefore granted them a selective advantage over other companies,” it said.
The Commission noted that it’s “original decisions in all three cases were ultimately annulled by the EU Courts and therefore the respective in-depth investigations remained open.”
“Today, taking into account the guidance of the EU Courts, the Commission has adopted three final decisions closing its in-depth investigations and confirming that, when granting their respective tax rulings, Luxembourg and the Netherlands did not give these Fiat, Amazon and Starbucks selective tax advantages contrary to EU State aid rules,” it concluded.
Amazon backstory
The Amazon tax case dates back to 2017 when Margrethe Vestager had charged Amazon with unfairly profiting from special low tax conditions in Luxembourg since 2003.
Amazon’s European headquarters are based in Luxembourg. As a result, almost three-quarters of Amazon’s profits in the EU were not taxed in an arrangement worth €250 million, Vestager had alleged at the time.
For years there had been complaints that big name tax firms were avoiding paying their fair share of tax within the European Union, by basing their European headquarters in “low tax” areas such as Ireland and Luxembourg.
The European Commission had pursued these ‘sweetheart’ tax arrangements between big name firms and certain countries, with mixed success.
In December 2023 for example French utility Engie won its fight against an EU order to pay 120 million euros in back taxes to Luxembourg.
Apple tax
But the European Commission scored a notable victory in its high profile case against Apple.
The European Commission in 2014 began its investigation of Apple’s tax arrangements in Ireland, and two years later in 2016 concluded that Apple had been able to avoid taxation on almost all profits generated in the EU single market.
In 2016 the European Commission ordered a reluctant Irish government to recover up to 13 billion euros (£11bn or $14.4 billion) plus interest in “illegal tax benefits”, after it found that two Irish tax rulings had artificially reduced Apple’s tax burden to as low as 0.005 percent in 2014.
But both Apple and the Irish government decided to appeal the fine, and that appeal began in September 2019.
That appeal bore fruit after an EU lower court in 2020 ruled in favour of Apple, overturning the tax order made against Apple by the Commission.
But in September 2024 Apple was finally ordered by the CJEU to pay Ireland €13bn in unpaid taxes.