#Netherlands and #Luxembourg to retrieve taxes from Starbucks and Fiat
Brussels , Belgium ( Agencies + DIPLOMAT.SO) – The European Union on Wednesday ordered the Dutch government to recover money from Starbucks and told Luxembourg to claw back funds from a Fiat Chrysler unit, in a widening crackdown on tax avoidance by corporations.
Margrethe Vestager, the antitrust chief of the European Union, said that Luxembourg and the Netherlands had given the multinational corporations illegal state aid by letting them shift profits and pay lower tax rates than those available to other companies.
Luxembourg must now recover up to 30 million euros, or $34 million, from the Fiat unit, Fiat Finance and Trade, and the Netherlands must take a similar amount from Starbucks.
The reason, Ms. Vestager said on Twitter, was “unpaid taxes due to illegal state aid.”
“All companies should pay their fair share of taxes,” she said in another post on Twitter.
The Netherlands made a cautious statement in response to the decision.
“The Dutch cabinet is somewhat surprised about the decision of the European Commission that Starbucks would have received state aid,” it said in a statement posted on the government’s website.
“The fact that the commission observes that there would be state aid in the Starbucks file raises a lot of questions and requires careful consideration,” said the government, which added that it “is convinced that actual international standards are applied and shall, therefore, analyze the commission’s criticism carefully before taking a decision on further steps.”
There was a sharp reaction against the decision from Luxembourg, which has grown rich on financial services in recent decades.
The finance minister of Luxembourg, Pierre Gramegna, said on his Twitter account that his country “disagrees with the conclusions reached by the European Commission in the Fiat Finance and Trade case, and reserves all its rights.”
That appeared to be a thinly veiled threat to appeal Ms. Vestager’s decision to the Court of Justice of the European Union in Luxembourg, the bloc’s highest tribunal.
The decisions are a sign of Europe’s determination to counter increasingly sophisticated tax strategies deployed by multinational companies.
The actions by Ms. Vestager could be just the first of a series of enforcement moves by her office, which has been investigating tax arrangements that some European countries have used to attract multinational companies. Other European Union members say the arrangements often amount to unfair competition that deprives them of tax revenue.
Wednesday’s decisions also signal a potential blow to the European tax strategies employed by big American technology companies, including Apple in Ireland and Amazon in Luxembourg. Those companies’ tax structures are also under review by Ms. Vestager. Asked about the investigations involving Amazon and Apple, Ms. Vestager told a news conference that those were “very different cases,” and she declined to give a date for decisions.
“More cases may come if we have indications that E.U. state-aid rules aren’t complied with,” Ms. Vestager said at a news conference, referring to other investigations into tax deals between European countries and companies.
Some legal experts expect many more such decisions to follow, and for big corporations to start rethinking their European tax strategies.
“We are potentially looking at hundreds of multinationals across the European Union that get these tax rulings, especially in smaller states, so this decision creates a lot of insecurity for corporations, especially those with such operations in smaller states,” said Annette Schild, the founder of the ALSchild law firm in Brussels, who is not involved in the tax rulings cases. “I don’t think the E.U. authorities are going to stop with two or three companies, and the mere threat of enforcement action is going to lead companies to change their ways.”
If Luxembourg and the Netherlands refuse to act on Ms. Vestager’s decision, the European Commission, the bloc’s executive arm, could sue the countries at the Court of Justice of the European Union.
Ms. Vestager’s order for the Netherlands and Luxembourg to recover back taxes might be deemed a windfall in an era of shrinking national budgets and weak economic growth. But the relatively small amounts are unlikely to offset the drawbacks, in the view of countries like Luxembourg and the Netherlands that have used low-tax inducements to compete for jobs and foreign investment in an increasingly competitive world.
“These are not spectacular sums, but that is not the message here,” said Ms. Vestager, referring to the money that Luxembourg and the Netherlands need to recover from Starbucks and the Fiat unit. Ms. Vestager said her aim was curbing corporate pricing arrangements that “have no relationship with the market” and that “twisted” European rules aimed at limited state aid.
Ms. Vestager’s office has been scrutinizing so-called tax rulings — essentially negotiated assurances that national authorities give to individual companies about the taxable value of profits and losses moved between subsidiaries.
The practices are increasingly seen as suspect by larger countries like France and Germany, where officials say the rulings allow companies to shift profits to nations that offer much more attractive tax rates.
While low across-the-board taxes are not a violation of European Union rules, special deals offered to some companies that are not available to all businesses in the country can be judged illegal.
Ms. Vestager has said that the arrangements often lack a genuine commercial basis, and that they are biased against start-up companies and small- and medium-size businesses that cannot afford the advice required for complex tax structuring.
Some of the practices have also drawn criticism from American lawmakers who, two years ago, identified Apple subsidiaries that have no “tax residency” in Ireland, where they are incorporated, nor in the United States, where the executives who manage those units are based.
The investigations into Starbucks in the Netherlands and Fiat Finance and Trade in Luxembourg were announced in June 2014 by Ms. Vestager’s predecessor, Joaquín Almunia. He had warned that tax evasion was making it more difficult for governments to manage their budgets.For more news and stories, join us on Facebook,Twitter , or contact us through our Email: firstname.lastname@example.org, email@example.com