European Union Rules Fiat and Starbucks Deals are Illegal

On Wednesday, the European Commission ruled that Fiat and Starbucks had benefited from tax deals that were illegal with the Luxembourg and Dutch governments, in cases that have major implications for the taxation of companies that are multinational.

Margrethe Vestager the antitrust commissioner said all companies must pay what she called a fair share and has ordered the Netherlands to recover back taxes of between $23 million and $34 million from the coffee store chain based in the U.S.

Luxembourg has been told to recover an amount similar from U.S.-Italian based Fiat Chrysler automobiles said the commissioner.

Immediately following the commission’s ruling, Starbucks said it was appealing, echoing the Dutch government’s accusations that the executives of the EU had made significant errors in the assessment.

Luxembourg, where a great deal of the economy has been built around attracting companies that are multinational, said it did not agree with the decision and reserved a right to make an appeal.

Fiat has denied receiving aid from the Luxembourg.

Vestager, who is Danish, has denied the accusations of an anti-American bias in the launching of other probes into taxes with Amazon and Apple and inquiries of competition with Google.

She took extra care not to intrude on governments’ jealousy in the EU and guarded right of setting their own tax rates. The issue she pointed out was the companies being treated in a different way within one national system.

She said the decision sends a message that national tax authorities are not able to give any firm, however powerful or large, an unfair advantage compared to any others.

For the majority of companies, especially those that are smaller or medium sized she said she hoped the announcement had been reassuring.

The European Commission said that Starbucks had benefitted from a ruling on taxes, from Dutch authorities during 2008 and Fiat from a similar ruling in 2012 in Luxembourg.

It concluded that the profits that were taxable for the Luxembourg unit of Fiat could have been as much as 20 times higher under market conditions that were normal.

 

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