European Commission rules illegal tax advantages granted to Fiat and Starbucks, Apple/Ireland decision later
The European Commission has ruled that tax advantages granted to Fiat in Luxembourg and to Starbucks in The Netherlands are illegal.
The investigation into the agreement made with Apple in Ireland is still ongoing, the Commission confirmed, as are probes into Amazon in Luxembourg and a Belgian tax scheme. Today’s decisions “do not prejudge” the outcome of those cases, Brussels said.
The EU’s competition chief said today [WEDS] that Luxembourg and The Netherlands artificially reduced the amount of tax that Fiat and Starbucks were liable to pay, amounting to savings of €20 - €30 million for each company. She has ordered the two countries to recover the money and end the practice.
“I hope that, with today's decisions, this message will be heard by Member State governments and companies alike. All companies, big or small, multinational or not, should pay their fair share of tax,” EU Competition Commissioner Margrethe Vestager said.
The decision came after a 16-month investigation by the Commission into so-called tax rulings, or “comfort letters”, issued by tax authorities to give a company clarity on how its corporate tax will be calculated in that country.
Under EU state aid rules, comfort letters in themselves are not illegal. But the Commission said today that Luxembourg and The Netherlands “endorsed artificial and complex methods to establish taxable profits for the companies” which it said “do not reflect economic reality” and are therefore illegal under EU rules.
The Commission focused its ire on the practice of "transfer pricing”, where profits are shifted abroad to other companies in the group based in low-tax or no-tax countries. This gave the corporations an unfair advantage, particularly over smaller companies, which don’t have the scale to move their business abroad.