EU orders Starbucks, Fiat to pay up over tax deals
EU orders Starbucks, Fiat to pay up over tax deals
Published: Oct 21, 2015 7:39 a.m. ET
By TOM FAIRLESS
BRUSSELS--The European Union has ordered Starbucks Corp.
and Fiat Chrysler Automobiles to pay back tens of millions of euros in unpaid
taxes obtained through illegal tax deals, in an unprecedented decision by
regulators that risks blowing open thousands of corporate tax structures across
Europe.
The European Commission, the EU's executive arm, said
Wednesday that tax deals granted to Starbucks in the Netherlands and Fiat in
Luxembourg amounted to illegal state subsidies that must be repaid.
The commission ordered Luxembourg and the Netherlands to
recover the unpaid tax from Fiat and Starbucks, which it said amounts to EUR20
million to EUR30 million ($22.6 million to $34 million) for each company. The
companies can no longer continue to benefit from the advantageous tax treatment
granted by these tax rulings, the commission said.
The two tax deals "endorsed artificial and complex
methods to establish taxable profits for the companies" that "do not
reflect economic reality," the commission said in a statement.
As a result of the deals, most of the profits of
Starbucks' Dutch coffee-roasting company "are shifted abroad, where they
are also not taxed," while Fiat's financing company in Luxembourg
"only paid taxes on underestimated profits," the commission said.
Wednesday's decision, wrapping up two of five tax
investigations opened by EU regulators in recent months, casts a pall of
uncertainty over potentially thousands of similar tax deals struck by
multinationals across Europe.
"Thousands of other companies risk seeing their tax
arrangements re-examined," said Chris Bryant, partner at international law
firm Berwin Leighton Paisner. "Billions of euros could be at stake."
EU regulators are working on three similar investigations
involving Apple Inc. in Ireland and Amazon.com Inc. in Luxembourg, as well as a
Belgian tax discount for a number of multinationals including AB InBev. It
isn't yet clear when those cases will be decided. All companies have denied
receiving special treatment, and the governments have denied giving it.
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