The European Commission’s decision to pull the plug on State aid investigations into Fiat, Amazon, and Starbucks is an admission of defeat with wider implications for the European Union, a UK-based tax consultant has said.

Bob Lyddon believes Remainers, such as former PM Theresa May, are to blame for an ongoing tax regime which allows taxable profits to be drawn out of the UK and into the bloc as a whole.

The European Commission recently closed its state aid investigations of the three giant companies after several years of legal and regulatory battles.

The cases centred on allegations that tax rulings by Luxembourg and the Netherlands unfairly benefited the companies by lowering their tax liabilities, which the Commission had initially argued constituted illegal state aid under EU rules.

Mr Lyddon, founder of Lyddon Consulting Services, told Express.co.uk that the Commission had unsuccessfully argued that member states had varied their normal rules to favour individual companies.

He explained: “This contrasts with the successful case against Apple in Ireland that the mainstream regime under which Apple operated amounted to illegal state aid.”

Mr Lyddon pointed out that it had been normal practice for decades for a foreign company looking to establish itself in the Netherlands and Luxembourg to seek a tax ruling.

He continued: “The company would submit an estimate and the tax authorities would issue a ruling stating what the annual tax payment would be, but without referring back to the estimate.”

Such a ruling constituted a fixed annual tax payment, regardless of the profits from the Dutch or Luxembourg subsidiary.

For instance, if the estimate for a Dutch company projected turnover of £414million (€500 million) and costs of £373million (€450 million), the profit would be £41 million (€50 million) and the tax, at the standard Corporate Income Tax rate of 25.8%, would be £10.7 million (€12.9 million).

Mr Lyddon continued: “That is an open invitation to the company to then route as large a volume of turnover as possible through the Dutch company, make profits of £62million (€75 million), £83million (€100 million), £124million (€150 million), because the tax remains at £10.7 million (€12.9 million). ”

Each extra €1 of turnover leads to €0 of extra tax, known as a ‘zero marginal tax rate’.

Mr Lyddon said: “This is a widely practised model and accounts for the fact that Amazon’s Luxembourg subsidiary is the one through which its UK turnover is channelled: Amazon’s invoices to its UK buyers state the selling party as Amazon EU s.a.r.l. UK branch.

“The branch will have little substance and no UK profit: the sales will be routed through to Luxembourg and be added to the rest of Amazon’s European sales.”

As such, they increased Amazon’s profits in Luxembourg and were subject to a ‘zero marginal tax rate’ within Amazon EU s.a.r.l., the addressee of the tax ruling, Mr Lyddon stressed.

He added: “It might well be asked why this rip-off of the UK exchequer was allowed to continue after Brexit when it was one of the main ways in which taxable profits were drawn away from the UK and into the purveyors of so-called ‘profit-shifting’: Ireland, Luxembourg, and the Netherlands.

“We would have to ask the UK’s main Brexit

 negotiator, Ollie Robbins, about that, or the two prime ministers whose efforts resulted in the Brexit-In-Name-Only: Theresa May and Boris Johnson.”

Mr Lyddon ominously concluded that: “Starmer now wants to re-set the UK/EU trade relationship, but this aspect is hardly likely to make it onto the agenda: ensuring that profits earned on UK activity are taxed in the UK, rather than in an EU member state.”

The Commission’s decisions to close the cases follow rulings from EU courts, including the General Court and the Court of Justice, which annulled the original findings.

The courts determined that the Commission failed to demonstrate that the tax rulings granted selective advantages that distorted competition.

Specifically, the evidence did not substantiate claims that these rulings breached EU state aid laws.

For instance, Luxembourg’s alleged €250 million tax benefit to Amazon and similar advantages for Fiat were deemed not unlawful due to insufficient proof of preferential treatment.