EU: Starbucks, Fiat profited from illegal tax breaks – USA TODAY
The European Union demanded Wednesday that coffee chain Starbucks and carmaker Fiat each repay up to $34 million they received in tax breaks from Luxembourg and the Netherlands.
The ruling, which follows an investigation launched last year by the European Commission — the 28-nation bloc’s executive arm — could mean that global multinationals are faced with fewer options when they look for countries with favorable tax deals.
Wednesday’s decision applies to tax breaks given to Starbucks and Fiat as a result of what the EU called “artificial and complex” tax methodologies.
“Tax rulings that artificially reduce a company’s tax burden are not in line with EU state aid rules. They are illegal. I hope that, with today’s decisions, this message will be heard by member state governments and companies alike,” EU antitrust Commissioner Margrethe Vestager said in a statement from Brussels.
“All companies, big or small, multinational or not, should pay their fair share,” she said.
Corey duBrowa, a Starbucks spokesperson, said the company “shares the concerns expressed by the Netherlands government that there are significant errors in the (EU) decision, and we plan to appeal.”
“Starbucks complies with all OECD rules, guidelines and laws and supports its tax reform process. Starbucks has paid an average global effective tax rate of roughly 33%, well above the 18.5% average rate paid by other large U.S. companies,” he said.
The Dutch government said it was “surprised” by the ruling because the arrangement was in line with international standards. A representative from Luxembourg’s national tax authority was immediately available for comment. Fiat said ahead of the announcement that it “never sought any derogation from the general (tax) law.”
The EU’s case is based around how Starbucks and Fiat establish taxable profits.
“They do not reflect economic reality,” the European Commission said.
“This is done, in particular, by setting prices for goods and services sold between companies of the Fiat and Starbucks groups (so-called “transfer prices”) that do not correspond to market conditions. As a result, most of the profits of Starbucks’ coffee roasting company are shifted abroad, where they are also not taxed, and Fiat’s financing company only paid taxes on underestimated profits,” it said.
Vestager said the EU is investigating similar tax practices elsewhere in the EU.
The EU previously opened a tax probe into Amazon and Apple, an investigation that is still pending.
“These are very different cases and will be assessed on their own merit,” Vestager said Wednesday in Brussels. “The outcome today does not prejudge the next decisions we will eventually take.”