Eurodad reaction to ECJ ruling on Amazon and ENGIE tax state aid cases
While the Commission’s state aid cases are important for shining a light on the problems, they are not the solution. We need to throw the current corporate tax system in the bin and replace it with a system fit for the 21st century.
Today the European Court of Justice decided to annul the European Commission’s decision that Luxembourg’s tax treatment of Amazon constituted illegal state aid. At the same time, the Court ruled in favor of the Commission in another state aid case concerning Luxembourg’s tax treatment of ENGIE. There is a significant likelihood that today’s court rulings will be appealed – as has been the case with several previous rulings on tax-related state aid cases.
In response to the Court’s ruling, Tove Maria Ryding, Tax Coordinator at the European Network on Debt and Development (Eurodad), said:
"We are in the midst of a global crisis, and at the same time, digital giants such as Amazon are cashing in record high profits but still pay very little tax. We won’t be able to fund the recovery from the crisis unless we make sure that the world’s biggest corporations pay their share of tax. While we welcome the fact that the Court upheld the Commission’s decision regarding ENGIE, the fact that the Court rejected the Commission’s decision regarding Amazon is a stark reminder of how difficult it is to use state aid rules to collect taxes. We urgently need to start treating the underlying disease, which is a deeply outdated and ineffective corporate tax system."
In response to the fact that the state aid cases against Amazon and ENGIE were initiated in 2014 and 2016 respectively, Ryding said: “The fact that it takes half a decade to decide what a multinational corporation should pay in tax is a strong sign that our corporate tax system is deeply flawed.
"Our broken tax system means we lose billions of Euros worth of tax income every year. We need this money to fund health care, education, environmental protection and recover from the Covid-19 crisis. Large-scale corporate tax avoidance is a problem we really cannot afford.
“Even if the Commission had won the case regarding Amazon, it still would not have solved the underlying problem, because the case only addresses an old structure, which was changed in 2014. In the meantime, it seems Amazon has managed to set up a new creative tax structure in Luxembourg, which allows it to record billion of Euros worth of sales income in Europe and pay zero corporate tax. The Commission’s state aid cases are important for shining a light on the problems, but they are not the solution. We need to throw the current corporate tax system in the bin and replace it with a system fit for the 21st century.
"In the case of ENGIE, we also see how it can take a long court case to decide whether it is ok for a corporation to have some of its profits taxed at an effective rate of less than one per cent. If we had a proper corporate tax system, it would be clear that this is outrageous and clearly not ok."
New rules under negotiation
Ryding said: "Right now, the OECD is leading a negotiation to adopt new global corporate tax rules. Unfortunately, the idea of replacing the broken transfer pricing system was taken off the table early on in the negotiations, and there is now a great risk that governments will fail to effectively address large-scale corporate tax avoidance. At the same time, the interests of the world’s poorest countries have been marginalised in the OECD-led negotiations. This is obviously deeply problematic and unsustainable.
"At the EU level, governments are now discussing whether citizens should be allowed to know where multinational corporations do business and how much they pay in tax in each country where they operate. This type of transparency would be a crucial game changer in the fight against corporate tax avoidance. Unfortunately, EU decision-makers are being hesitant, and there is a very real risk that they will end up siding with the corporate lobby instead of the European citizens that are calling for political leadership in times of crisis."
Media contact: Julia Ravenscroft, Communications Manager, Eurodad: +32 486356814/ [email protected]
Note to Editors
- In October 2017, the European Commission published the result of a state aid investigation, in which it concluded that Luxembourg gave illegal tax benefits to Amazon worth around €250 million. The Commission’s decision has since been appealed to the European Court of Justice by both Luxembourg and Amazon.
- A year later, in June 2018, the European Commission published the result of another state aid investigation concerning Luxembourg – this time in relation to the company ENGIE. In this case, the Commission concluded that Luxembourg had given ENGIE illegal tax benefits worth around €120 million. This decision was also appealed by Luxembourg and ENGIE.
- Luxembourg has been the subject of several investigations, including an ongoing probe into some of their tax deals with multinational Huhtamäki, one of which was disclosed as part of the LuxLeaks scandal. The European Commission and Court of Justice previously found that Luxembourg provided Fiat with illegal tax benefits of more than €20 million, a decision which is currently being appealed by Fiat in the EU's highest court.
- More than 130,000 people across Europe have signed a petition in the past month calling on EU leaders to introduce transparency rules that would allow citizens see how much tax large multinational corporations like Amazon pay and where they pay it.