Sunday

11th Apr 2021

EU: Starbucks and Fiat must repay €20-30mn on illegal tax deals

Starbucks and Fiat have to pay millions of euros in back taxes to the Netherlands and Luxembourg, because their tax deals amounted to illegal state aid, the EU Commission said on Wednesday (21 October).

The bloc’s executive ruled the companies’ sweetheart deals with the Netherlands and Luxembourg tax authorities artificially lowered the tax they have to pay into the states’ budgets.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

In its ruling, the Commission ordered Luxembourg to collect €20-30 million in taxes from Fiat’s financial subsidiary, Fiat Finance and Trade, and for the Netherlands to do the same with Starbucks.

“Tax rulings that artificially reduce a company’s tax burden are not in line with EU state aid rules. They are illegal,” Margrethe Vestager, the European anti-trust commissioner, said.

The Commission noted that Starbucks’s coffee roasting subsidiary in Amsterdam was given selective advantage by a 2008 tax ruling issued by Dutch authorities, and reduced its tax burden by €20-30 million.

The 2008 rulings allowed lowered tax rates for Starbucks in two ways.

It paid a substantial royalty to Alki (a UK-based company in the Starbucks group) for coffee-roasting know-how, and paid an inflated price for green beans to Switzerland-based Starbucks Coffee Trading SARL, the Commission said.

The Commission said the Fiat subsidiary also enjoyed an advantage as a Luxembourg tax ruling in 2012 unduly reduced its tax burden by €20-30 million.

The EU executive said the capital base calculated by the tax ruling is much lower than Fiat’s actual capital, and the estimated remuneration of the tax for this lower capital is also much lower compared to market rates.

Starbucks to appeal

The companies, Luxembourg, and the Netherlands all deny breaching EU state aid rules.

Starbucks plans to appeal the ruling, arguing they adhered to the rules of the Netherlands and the OECD, the Paris-based club of the world's 33 richest countries.

A spokesperson for the US company said they agree with the Netherland’s assessment that there are “significant errors” in the decision.

An EU source argued, however: “We are not the police of the OECD, they have their own rules.”

The Netherlands was “surprised” by the decision, and said “it raises a lot of questions.” It added in a statement: “The Netherlands is convinced that actual international standards are applied.”

Luxembourg also disagrees with the Commission’s ruling, it said in a statement. It claimed the Commission has used “unprecedented criteria” in establishing the state aid decision.

While the tax authorities of the two member states made the schemes possible, EU state aid rules do not allow the Commission to fine member states for illegal behavior.

However, if member states fail to recover the illicit state aid, then the Commission could take the country to court and then the court could impose a fine.

US giants Apple in Ireland and Amazon in Luxembourg are also under scrutiny by the EU Commission and Wednesday’s decisions could be bad omen.

But Vestager insisted they are different cases.

“These are very different cases and will be assessed on their own merit. The outcome today does not prejudge the next decisions we will eventually take,” the Danish commissioner said.

It is not clear yet when those investigations will close.

EU to rule on Apple tax deals this year

The EU is expected to close its antitrust investigation by the end of the year into whether Apple recieved illegal tax treatment in Ireland.

News in Brief

  1. Turkey blames EU for sexist protocol fiasco
  2. France to close elite civil-service academy
  3. Covid-19 cases in UK drop 60%, study finds
  4. White House urges 'calm' after Northern Ireland riots
  5. Italy's Draghi calls Turkey's Erdoğan a 'dictator'
  6. Slovakia told to return Sputnik V amid quality row
  7. EU risks €87bn in stranded fossil fuel assets
  8. Obligatory vaccination not against human rights, European court says

Vietnam jails journalist critical of EU trade deal

A journalist who had demanded the EU postpone its trade deal with Vietnam until human rights improved has been sentenced to 15 years in jail. The EU Commission says it first needs to conduct a detailed analysis before responding.

Stakeholders' Highlights

  1. Nordic Council of MinistersDigitalisation can help us pick up the green pace
  2. Nordic Council of MinistersCOVID19 is a wake-up call in the fight against antibiotic resistance
  3. Nordic Council of MinistersThe Nordic Region can and should play a leading role in Europe’s digital development
  4. Nordic Council of MinistersNordic Council to host EU webinars on energy, digitalisation and antibiotic resistance
  5. UNESDAEU Code of Conduct can showcase PPPs delivering healthier more sustainable society
  6. Nordic Council of MinistersWomen benefit in the digitalised labour market

Latest News

  1. The Covid bell tolls for eastern Europe's populists
  2. Four deaths after taking Russian Sputnik V vaccine
  3. Post-Brexit riots flare up in Northern Ireland
  4. Advice on AstraZeneca varies across EU, amid blood clot fears
  5. Greenland election could see halt to rare-earth mining
  6. After 50 years, where do Roma rights stand now?
  7. Why Iran desperately wants a new nuclear deal
  8. Does new EU-ACP deal really 'decolonise' aid?

Join EUobserver

Support quality EU news

Join us