Business Irish

Wednesday 16 October 2019

Starbucks wins EU tax case with Apple verdict in the balance

Starbucks won its legal fight against an EU demand to pay up to €30m in Dutch back taxes. Photo: PA
Starbucks won its legal fight against an EU demand to pay up to €30m in Dutch back taxes. Photo: PA
Donal O'Donovan

Donal O'Donovan

EU commissioner Margrethe Vestager's charge that Starbucks got a 'sweetheart' tax deal from the Netherlands has collapsed.

The US coffee giant won its legal fight yesterday against an EU demand to pay up to €30m in Dutch back taxes. However, in a similar case, Fiat Chrysler lost its challenge against an order to pay a similar amount to Luxembourg - a win for the European Commission.

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Both cases, along with the even more high-profile €13bn Irish Apple tax ruling, were part of European competition commissioner Ms Vestager's crackdown on tax arrangements EU member states had provided to multinationals.

Ireland and Apple have both appealed against the much bigger tax case, and lawyers for all three sides will closely examine the Starbucks and Fiat Chrysler decisions to assess any implications.

In its judgments, the EU General Court, Europe's second highest, endorsed the thrust of the European Commission's methodology in its tax actions, but failed to show a tax advantage had been enjoyed by Starbucks.

It marks an important legal victory for the Commission, said Dimitrios Kyriazis, head of the law faculty at New College of the Humanities London. "Regardless of the outcome of individual cases, the General Court seems to have sanctioned the Commission's approach," he said.

That is potentially a bad omen for Apple.

In Starbucks' case, the EU competition authorities failed to show that the coffee chain benefited unfairly from the Dutch tax deal, the court said.

"The Commission was unable to demonstrate the existence of an advantage in favour of Starbucks," judges said.

The Dutch finance ministry said the judgment showed that the multinational was treated the same as other companies.

Starbucks welcomed the ruling, saying it had not received any special tax treatment from the Netherlands and it "pays all of its taxes wherever they are due".

In a separate ruling, the court upheld the Commission's decision against Fiat's Luxembourg tax deal.

It said the Commission had applied its state aid rules correctly to assess if there was an illegal advantage, and was not seeking to harmonise tax rules across the bloc - an argument cited by critics.

It agreed with the Commission's finding that the Luxembourg tax ruling was selective and not available to all companies - a key argument used by businesses ordered to pay back taxes.

Luxembourg said it would analyse the judgment and reserved all its rights. Fiat Chrysler Finance Europe said it was disappointed and considering its next steps.

Ms Vestager said the court endorsed the Commission's approach in using state aid rules in tax cases, adding however that a more comprehensive strategy was needed to tackle tax avoidance.

Additional reporting Reuters

Irish Independent

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