Why Amazon pays so little taxes

The online retailer Amazon has hardly paid any taxes in Europe again – and the EU Commission’s attempt to change that has now failed in court, as it did before with Apple. Why is that?

Amazon escapes the clutches of the EU Commission one more time.

IIn July it was Apple; now it is Amazon. The EU Commission has again suffered a bitter defeat in a tax aid proceeding in court. On Wednesday, the responsible EU court (EuG) conceded the 2017 decision of the EU competition authority that the state of Luxembourg had to reclaim from Amazon tax breaks in the amount of 250 million euros plus interest. In the opinion of the court, the Commission has not sufficiently proven in legal terms that a tax assessment from the Luxembourg authorities tailored to the needs of online retailers wrongly reduced the tax burden of a European Amazon subsidiary. Not only Amazon, but also Luxembourg went to court against the Commission’s decision: The Grand Duchy gladly waived the money in order to be able to keep the company in the country. Amazon is one of the largest employers in the country. Ireland behaved similarly in 2016 and sued to claim back 13 billion euros from Apple – and got it right in 2020.

Amazon, Apple, but also Google, Starbucks and others: there is always the suspicion that large international corporations – above all American digital companies – choose their European headquarters where the tax authorities are particularly favorable to them. They process a large part of the EU sales through the holding companies located there and thus save taxes. The prerequisite for this are usually preliminary agreements (tax rulings) with the tax authorities, which are tailored to the respective company. Since 2013, the EU authority has repeatedly used the means of state aid law to counter these special agreements. The tax benefits for Amazon in Luxembourg that Brussels complained about date back to the years 2006 to 2014. The Commission found in 2017 that the online retailer had not paid any tax on three quarters of its profits from EU sales during this period.