Wednesday

14th Nov 2018

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

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join 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. EU's Tusk is Poland's most trusted politician
  2. Finland prepares to step in for Romania on EU presidency
  3. Trump threatens tariffs on EU wine
  4. US defence chief backs Nato amid 'EU army' calls
  5. Italy defies EU deadline on changing budget
  6. Report: FBI looking into Brexiteers Farage and Banks
  7. Italian journalist unions protest 5MS 'whores' jibe
  8. Czech PM's son alleges kidnap plot against his father

Stakeholder

An open China brings opportunities to Europe

Some 60 years ago, the first major World Fair after World War II was held in Brussels. Sixty years on, China International Import Expo (CIIE), the first world expo dedicated to expanding imports, will open in Shanghai, China.

Stakeholders' Highlights

  1. NORDIC COUNCIL OF MINISTERSTheresa May: “We will not be turning our backs on the Nordic region”
  2. International Partnership for Human RightsOpen letter to Emmanuel Macron ahead of Uzbek president's visit
  3. International Partnership for Human RightsRaising key human rights concerns during visit of Turkmenistan's foreign minister
  4. NORDIC COUNCIL OF MINISTERSState of the Nordic Region presented in Brussels
  5. NORDIC COUNCIL OF MINISTERSThe vital bioeconomy. New issue of “Sustainable Growth the Nordic Way” out now
  6. NORDIC COUNCIL OF MINISTERSThe Nordic gender effect goes international
  7. NORDIC COUNCIL OF MINISTERSPaula Lehtomaki from Finland elected as the Council's first female Secretary General
  8. NORDIC COUNCIL OF MINISTERSNordic design sets the stage at COP24, running a competition for sustainable chairs.
  9. Counter BalanceIn Kenya, a motorway funded by the European Investment Bank runs over roadside dwellers
  10. ACCACompany Law Package: Making the Best of Digital and Cross Border Mobility,
  11. International Partnership for Human RightsCivil Society Worried About Shortcomings in EU-Kyrgyzstan Human Rights Dialogue
  12. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs

Latest News

  1. Knives out on all sides for draft Brexit deal
  2. Romania data chief defends forcing press to reveal sources
  3. EU to review animal welfare strategy
  4. Macron's 'European army': why is everyone talking about it?
  5. Merkel calls for 'real, true' EU army
  6. Italy defiant on budget on eve of EU deadline
  7. EU action on Hungary and Poland drowns in procedure
  8. EU unable to fully trace €1bn spent on refugees in Turkey

Join EUobserver

Support quality EU news

Join us