Starbucks and Fiat must pay back taxes Commission rules

Starbucks and Fiat Chrysler Automobiles NV benefited from illegal tax deals with the Dutch and Luxembourg authorities, according to the European Commission.  In a  landmark ruling, EU Antitrust Commissioner Margrethe Vestager (pictured) said all firms must pay a "fair share" and ordered the Netherlands to recover €20 million to €30m in back taxes from the  coffee shop chain.

Luxembourg must recover a similar amount from Italian-U.S. carmaker Fiat.  Vestager said Fiat's Luxembourg unit paid "not even" €0.4m in corporate tax last year and Starbucks' Dutch subsidiary less than €0.6m.  One Brussels-based consultant was quoted as saying that this, the  first of several EU cases to be concluded, would "rock the corporate world to its very core".

Starbucks, however, said it would appeal and agreed with the Dutch government in accusing the Commission of significant "errors" in its assessment. The company said it paid an average global effective tax rate of about 33 percent  Fiat denied receiving any aid from the Luxembourg state.  In a ruling on Wednesday (21 October), Vestager said: "The decisions send a clear message.National tax authorities cannot give any company, however large or powerful, an unfair competitive advantage compared with others. For most companies, especially the small and medium-sized, I hope this is a reassuring message."

The Commission said Starbucks benefited from a tax ruling - an assurance of future tax levels - from Dutch authorities in 2008 and Fiat from a ruling in Luxembourg in 2012. It concluded that the taxable profits for Fiat's Luxembourg unit could have been 20 times higher under normal market conditions.  The precise sum to be paid must now be set by Luxembourg and the Netherlands on the basis of the Commission's methodology.  Vestager described the cases of Apple in Ireland and Amazon in Luxembourg, where the Commission also suspects the companies of benefiting from illegal state subsidies via the tax system, as "very different". Inquiries are also continuing into the Belgian government's treatment of dozens of unidentified companies.

"More cases may come if we have indications that EU state aid rules are not being complied with. We cannot achieve fair tax competition in Europe with enforcement of EU state aid rules alone," said the commissioner.  The former Danish economy minister added, "The fight against tax evasion and tax avoidance can only be won with a combination of state aid rules and legislative responses."

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