The call comes after European Commission officials said that Starbucks and Fiat Chrysler must both pay back as much as €30 million in back taxes after it ruled that so-called “sweetheart tax deals” made by the companies with tax authorities in the Netherlands and Luxembourg were illegal.
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Luxembourg’s tax ruling for Fiat Finance and the Netherlands’s ruling for Starbucks do not reflect economic reality such that they grant selective tax advantages to the two companies in breach of EU law, the European Commission has concluded.
Starbucks said it would appeal the decision since it followed all the necessary tax rules.
“The fact that the commission observes that there would be state aid in the Starbucks file raises a lot of questions”, the Dutch government.
“The companies in this case were well aware that their behavior was illegal and took measures to avoid being detected”, said European Commissioner Margrethe Vestager.
The government now has to recover between 20 and 30 million euros in back taxes from the multinational. “They are illegal”, Ms. Vestager said.
Fiat’s taxes “would have been 20 times higher if calculations had been done at market conditions”, she added said.
“We do not stop here”. The NGO ActionAid welcomed the ruling, but warned that it was just the tip of the iceberg: “ActionAid estimates that developing countries lose at least $138bn per year to special tax breaks”, it said. “The fight against tax evasion and tax avoidance can only be won with a combination… of state aid rules and legislative responses”. “As a result, most of the profits of Starbucks’s coffee roasting company are shifted overseas, where they are also not taxed, and Fiat’s financing company only paid taxes on underestimated profits”.
“With the noose tightening around aggressive global tax structures, many large [multinational companies] may find the tax cost of doing business increasing”, said Lee Curthoys, a corporate tax expert at Radius Worldwide, a consultancy.
At issue are tax rulings, which are used to confirm the size of companies’ future tax bills, to give company directors certainty as to their future obligations.
Luxembourg’s government said it disagreed with the EU’s decision “and reserves all its rights”.
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 investigation into tax deals also includes iPhone maker Apple AAPL. The ministry said it was “convinced that actual global standards are applied”. O and online retailer Amazon AMZN. O . Further, “the estimated remuneration applied to this already much lower capital for tax purposes is also much lower compared to market rates”, it said.
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However Minister Bruton says he is not anxious.
