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1st LD Writethru: Brussels rules Starbucks, Fiat sweetheart tax deals unlawful

Xinhua, October 21, 2015 Adjust font size:

The sweetheart tax deals struck by Starbucks and Fiat with European nations were ruled illegal, the European Commission announced on Wednesday, ordering each to repay up to 30 millions euros (34 million U.S. dollars) in back taxes.

The decision came after 15-month in-depth investigations. The commission, the executive arm of the European Union (EU), said that Starbucks' coffee roasting company in the Netherlands and Fiat's financing subsidiary in Luxembourg were granted "selective tax advantages" by local authorities.

Dutch and Luxembourg tax policies have for years helped both multinationals reduce tax by a total of between 20 and 30 million euros, said the commission in a statement.

"Tax rulings as such are perfectly legal," the commission said. Starbucks and Fiat were given tax assurance, or "comfort letters" by Dutch and Luxembourg government. The comfort letters gave companies clarity on how their corporate taxes would be calculated or on the use of special tax provisions.

"However, the two tax rulings under investigation endorsed artificial and complex methods to establish taxable profits for the companies," the commission concluded. "They do not reflect economic reality."

The Netherlands and Luxembourg were ordered to recover from both multinationals a total of between 20 to 30 million euros in back taxes.

Margrethe Vestager, EU's antitrust commissioner, said the findings aimed to send out a clear message that "all companies, big or small, multinational or not, should pay their fair share of tax."

"Tax rulings that artificially reduce a company's tax burden are not in line with EU state aid rules. They are illegal," she said.

The commissioner also signaled that more cases were expected to be explored. Apple in Ireland and Amazon in Luxembourg are also suspected to benefit from unlawful state aid. "We do not stop here," she warned.

Luxembourg Finance Minister Pierre Gramegna denied that his government's policy has violated EU regulations. "Luxembourg disagrees with the conclusions reached by the European Commission in the Fiat Finance and Trade case and reserves all its rights," he tweeted.

Fiat echoed with denying receiving any aid from Luxembourg while Starbucks immediately responded that it would appeal. (1 euro = 1.135 U.S. dollars) Endit