Fiat and Starbucks must pay up to €30 million each in back taxes after the European Commission ruled Wednesday that they had received tax breaks that amounted to illegal state aid.
The ruling is a warning signal to multinationals across Europe, particularly tech giants Apple and Amazon, whose tax arrangements are under Commission scrutiny.
It also represents a unprecedented attack on the ability of certain European countries, notably Luxembourg and Ireland, to market themselves as tax havens to corporations.
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“These assessments send a clear message: National tax authorities cannot give any company, big or small, large or powerful, an unfair competitive advantage compared to others,” said Margarethe Vestager, the European commissioner for competition. “For most companies, maybe medium sized or small, I hope this is a reassuring message.”
The Commission ordered Luxembourg to collect between €20 million and €30 million from Fiat, while the Netherlands must send a similar tax bill to Starbucks’ local headquarters.
At issue are the deals these companies struck with local tax authorities, which outlined how inspectors would value certain assets and treat certain business lines.
Since the probes began in the summer of 2014, both the Dutch and Luxembourg governments have denied breaching EU law.
A Starbucks spokesperson said the company planned to appeal the decision, adding that the firm had paid $3 billion in taxes globally during the time under examination.
Fiat reiterated on Tuesday its view that it had not received any state aid.
Fiat’s subsidiary in Luxembourg, which for two decades was under the premiership of Commission President Jean-Claude Juncker, aggressively courted foreign multinationals to the ire of European neighbors.
Luxembourg is also expected to appeal Vestager’s decision, amid fears that the Commission could start to examine hundreds of other tax agreements in the Grand Duchy.
Over the years, Luxembourg has staunchly defended its right to attract multinationals by offering ultra-low tax rates and strict banking secrecy rules, leading to complaints that it has facilitated tax evasion.
The LuxLeaks scandal, which broke in November 2014, led to a renewed chorus of complaints, after it revealed hundreds of Luxembourgish tax deals guaranteeing multinationals single-digit tax rates.
Vestager’s state aid investigators are now expected to wrap up tax probes involving Amazon and Apple. Those cases could prove more controversial, since the sums are potentially much larger.
Any decision ordering Amazon and Apple to pay back taxes from the past decade will invariably stoke complaints across the Atlantic that Europe’s regulators are simply protecting local firms from U.S. innovators.
A report by the U.S. Congress in May 2013 concluded that, thanks to a deal struck with Irish tax inspectors in 1991 and renewed in 2007, Apple paid just 2 percent tax on its non-U.S. revenues.
According to company reports, Apple’s 2013 global profits were around €20 billion, with about a fifth of its revenue coming from Europe.
Vestager is also examining a 2003 tax deal between Amazon and Luxembourg’s tax authorities, which allowed the online retailer to cycle its European profits through the Grand Duchy.
Both Apple and Amazon deny breaching EU law.
This article has been updated to include more details.
Watch Vestager’s press statement: