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EU rules Starbucks and Fiat tax deals are illegal

A paper cup at Starbucks’ Vigo Street branch in Mayfair, central London. Photo: Stefan Wermuth/Reuters

A paper cup at Starbucks’ Vigo Street branch in Mayfair, central London. Photo: Stefan Wermuth/Reuters

Europe’s competition chief has ordered the Netherlands to recover €20-30 million in back taxes from Starbucks yesterday and told Luxembourg to claim the same amount from Fiat Chrysler Automobiles, saying their favourable tax arrangements breached the bloc’s rules.

The decision by European Competition Commissioner Margrethe Vestager forms part of a crackdown by regulators worldwide against tax avoidance.

Special deals that slash multi-nationals’ tax bills to little more than zero in some cases have come under closer scrutiny as governments struggle with declining revenues.

“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,” Vestager said in a statement.

Favourable tax arrangements breached the bloc’s rules

“All companies, big or small, multi-national or not, should pay their fair share of tax,” she added.

The Commission said Starbucks had benefited from a tax ruling from Dutch authorities in 2008 and Fiat from a ruling in Luxembourg in 2012. The Commission concluded that the taxable profits for Fiat’s Luxembourg unit could have been 20 times higher under normal market conditions.

The precise amount of tax to be recovered must now be determined by Luxembourg and the Netherlands on the basis of the Commission’s methodology.

The Commission’s year-long investig-ation into tax deals also includes iPhone maker Apple and online retailer Amazon. More recently, it opened an inquiry into tax arrangements in Belgium.

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