Amazon Tax Structure Like Something Out of a Bond Movie, EU Says

Amazon.com Inc.’s efforts to minimize its taxes in the European Union were given a code-name evocative of a spy thriller with British agent 007, according to an EU lawyer, who claimed the arrangements broke the bloc’s state-aid rules.

“Project Goldcrest — it sounds like the title of a James Bond movie, but it is not,” it’s the name “Amazon gave to a complex tax construction by which it fundamentally reorganized its global business,” European Commission attorney Paul-John Loewenthal told a hearing at the EU’s top court on Thursday.

“In 2006, that project had one purpose to ensure that Amazon would avoid paying tax on its European profits.” Under that plan, “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.”

The EU’s executive arm is appealing a painful defeat inflicted by a lower court, which overturned a decision to force the ecommerce firm to pay back €250 million ($265 million) of tax breaks regulators deemed to be an unfair subsidy.

The 2021 defeat marked the second big blow to Margrethe Vestager, who has made tax fairness a key part of her tenure as EU competition commissioner. The same judges a year earlier also toppled a record €13 billion tax bill for Apple Inc. Vestager’s crackdown against the Silicon Valley firms was part of an eight-year EU crusade against allegedly unfair deals doled out by nations such as Luxembourg, Ireland and the Netherlands to attract multinationals.

While the amount at stake in the Amazon case is relatively tiny, it marked another important step in potentially shaping the course of pending EU investigations into similar tax arrangements for companies, including Nike Inc. and Ikea units.

At Thursday’s hearing, Amazon hit back at the commission, calling its appeal “flawed” and without merit. “The commission itself acknowledged in the decision that Amazon structure at the time is not at issue and Amazon paid taxes on all of what the commission calls European profits,” said Michel Petite, a lawyer at Clifford Chance, who works for Amazon.

Stellantis NV’s Fiat last year also won its fight to overturn a €30 million tax bill over its arrangements in Luxembourg, after the EU’s top court said the commission’s analysis had been wrong.

A global push for more tax transparency was fueled in 2014 by the so-called Luxleaks revelations by a group of investigative reporters, who published thousands of pages detailing secret tax arrangements between Luxembourg and multinational companies including Walt Disney Co., Microsoft Corp.’s Skype and PepsiCo Inc.

An adviser to the EU court is expected to issue a non-binding opinion in Thursday’s case on June 8. A final ruling is likely to follow several months later.

To contact the reporter on this story:
Stephanie Bodoni in Luxembourg at sbodoni@bloomberg.net

To contact the editors responsible for this story:
Jeremy Hodges at jhodges17@bloomberg.net

Stephanie Bodoni, Peter Chapman

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