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LUXEMBOURG (Reuters) – An EU decision ordering Amazon (NASDAQ:AMZN) to pay about 250 million euros ($265 million) in back taxes to Luxembourg relies on “atmospherics” and is without merit, the company said on Thursday, as it sought to convince Europe’s top court to throw out an appeal by EU regulators.
The European Commission in its 2017 decision said a Luxembourg tax arrangement allowing Amazon to channel profits to a holding company tax-free meant it paid no taxes on almost three-quarters of its profits from EU operations, in essence amounting to illegal state aid.
The U.S. online retailer challenged the EU tax order in a lower tribunal, convincing it to scrap it in 2021, in a setback to competition chief Margrethe Vestager’s crackdown on preferential deals.
The Commission subsequently appealed to Europe’s highest court, the Court of Justice of the European Union (CJEU).
“The Commission relies heavily on atmospherics to paint Amazon in a negative light and justify its decision. It claims the decision is about tax structuring and tax dodging. But it is not,” Amazon lawyer Michel Petite told the CJEU.
He said the EU executive’s appeal lacked merit as it used the wrong reference framework to determine whether Amazon had a selective advantage, citing the CJEU’s judgment last year on Fiat’s tax case which said such a framework should take into account national laws.
Petite also faulted the Commission on its concept of transfer pricing, which are prices for goods and services sold between subsidiaries.
“The most striking illustration of the Commission’s made-up transfer pricing is perhaps the fact that it relies on a concocted compilation of different versions of the OECD Guidelines, spanning a period of more than 20 years,” he said.
Commission lawyer Paul-John Loewenthal said it was clear that Amazon’s Luxembourg tax deal constituted state aid.
“Luxembourg provided a measure to Amazon by which Amazon could exempt the vast majority of its European profit from taxation in return for investments in Luxembourg, thus affecting intra-EU trade and distorting competition,” he said.
“That is the very definition of fiscal state aid.”
Vestager’s crackdown has already forced Belgium, Ireland, Luxembourg and the Netherlands to change their tax practices.
The CJEU adviser will deliver a non-binding opinion on June 8, with a judgment due in the coming months. The case is C-457/21 P Commission v Luxembourg and Others.
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