The sums will barely dent revenues. “It can’t be tolerated if a few companies are particularly resourceful in avoiding taxes”. The Netherlands is convinced that actual worldwide standards are applied and shall, therefore, analyze the Commission’s criticism carefully before taking a decision on further steps.
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Vestager acknowledged that the parties have a right to appeal.
The government in Luxembourg said it “does not consider that Fiat Finance and Trade has been granted incompatible state aid”. “For most companies, especially the small and medium-sized, I hope this is a reassuring message”.
The Commission’s statement said it had found, during a year-long investigation into the two tax rulings, that “most of the profits of Starbucks’ coffee roasting company are shifted overseas, where they are also not taxed, and Fiat’s financing company only paid taxes on underestimated profits”.
Fiat’s taxes “would have been 20 times higher if calculations had been done at market conditions”, she added said. Eva Joly, a Green MEP and long-time critic of tax rulings, warned that Luxembourg and the Netherlands were hardly alone in abusing the practice.
Warning that “we do not stop here”, Vestager described the cases of Apple in Ireland and Amazon in Luxembourg, where the Commission also suspects the companies of benefiting from illegal state subsidies via the tax system, as “very different”.
Both the Netherlands and Luxembourg said they disagreed with the ruling and were exploring their legal options. All companies have denied receiving special treatment, and the governments have denied giving it.
In Starbucks’ case, the European Union said that most of the profits of the company’s Dutch coffee-roasting unit are “shifted overseas, where they are also not taxed”. “The fight against tax evasion and tax avoidance can only be won with a combination… of state aid rules and legislative responses”.
The Commission’s investigation showed that a tax ruling issued by the Luxembourg authorities in 2012 gave a selective advantage to Fiat Finance and Trade, which has unduly reduced its tax burden since 2012 by €20 – €30 million.
The two countries now were ordered to recover the unpaid tax from Starbucks and Fiat.
The tax strategies the Commission is now calling illegal state aid are used by many companies, he said.
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The LuxLeaks revelations were a huge embarrassment to Jean-Claude Juncker, who took over as European Commission President last November after serving almost 19 years as Luxembourg prime minister during the period when the tax deals were made. Italian carmaker Fiat and multinational corporation Starbucks are to receive a letter from EU Competition Commissioner Margrethe Vestager.
