In a blow to the European Union's efforts to tackle corporate tax avoidance, Amazon has emerged victorious in a long-standing legal battle over tax arrangements with Luxembourg's government. The ruling, delivered by the EU's top court, means that the U.S. e-commerce giant will not have to pay approximately 250 million euros ($273 million) in back taxes. This decision marks a setback for Margrethe Vestager, the EU's antitrust chief, who has been leading the charge against sweetheart tax deals for multinationals.

The Court of Justice upheld a 2021 decision by judges in a lower court who sided with Amazon, stating that the European Commission had failed to prove that the tax ruling given to the company by Luxembourg constituted illegal state support. In a press release, the court confirmed that the Commission had not established that the tax ruling "was a State aid that was incompatible with the internal market" of the EU. Amazon welcomed the ruling, asserting that it had adhered to all applicable laws and had not received any special treatment.

This legal battle dates back to 2017 when Vestager accused Amazon of unfairly benefiting from favorable tax conditions in Luxembourg since 2003. She claimed that this allowed the company to evade taxation on nearly three-quarters of its EU profits. The EU has been targeting such deals between individual countries and companies, which have enabled foreign multinationals to establish their headquarters in favorable tax jurisdictions within the bloc. This practice has triggered competition among EU states and has allowed multinationals to play them off against each other.

The EU's defeat in this case has drawn criticism from organizations such as Oxfam. Chiara Putaturo, Oxfam's EU tax expert, expressed disappointment, stating that Amazon had received an early Christmas present by avoiding its decade-old tax bill to Luxembourg. Putaturo called for real tax reforms to address the issue of tax havens within the EU, which enable companies to evade their tax obligations through empty offices.

This court ruling further highlights the mixed track record of Margrethe Vestager in defending tax decisions against legal challenges. Earlier this month, French utility Engie successfully won its fight against an EU order to pay 120 million euros in back taxes to Luxembourg. The outcome of these cases underscores the complexity and difficulty of combating corporate tax avoidance within the EU. The European Commission has stated that it will carefully study the judgment and assess its implications, suggesting that further action may be taken in response to the ruling.