EU demands Starbucks, Fiat pay back millions in tax breaks

Posted at 5:13 AM, Oct 21, 2015
and last updated 2015-10-21 06:13:03-04

BRUSSELS (AP) — The European Union is demanding that U.S. coffee chain Starbucks and carmaker Fiat repay up to 30 million euros ($34 million) each in tax breaks they received from EU nations, in a major ruling to cut down on sweet tax deals global multinationals often shop for.

EU antitrust Commissioner Margrethe Vestager said Wednesday that "all companies, big or small, multinational or not, should pay their fair share of tax."

The European Commission polices state aid and antitrust laws and has been tightening loopholes in EU legislation that have allowed individual EU countries to attract multinationals with advantageous tax deals.

Vestager said the Netherlands will have to recoup the unpaid taxes from Starbucks and Luxembourg from Fiat.

Starbucks said in an immediate reaction that it plans "to appeal since we followed the Dutch and OECD rules," referring to the Organisation for Economic Co-operation and Development group of developed economies.

Fiat Chrysler also denied receiving any illegal state aid from Luxembourg and said a deal it reached with Luxembourg was aimed only at clarifying pricing rules and "did not result in any state aid."

Vestager maintained that both multinationals received "selective tax advantages" by which companies are lured to specific nations with a promise they will pay fewer taxes than they might pay elsewhere.

The Netherlands must now recoup between 20 million and 30 million euros ($23 million and $34 million) from Starbucks and Luxembourg as much from Fiat. "This will remove the unfair advantage they have enjoyed," Vestager said.

Fiat's taxes "would have been 20 times higher if calculations had been done at market conditions," she added said.

She said the EU is investigating similar tax practices in all of the bloc's 28 nations.

"We do not stop here. We continue the enquiries into tax rulings," she said. "More cases may come if we have indications that EU state aid rules are not being complied with."