Consumer Staples

EU rules Starbucks, Fiat tax deals are illegal

EU saying Starbucks and Fiat broke the law

Europe's competition chief ordered the Netherlands to recover 20-30 million euros in back taxes from Starbucks on Wednesday and told Luxembourg to claim the same amount from Fiat Chrysler Automobiles, saying their favorable tax arrangements breached the bloc's rules.

The decision by European Competition Commissioner Margrethe Vestager forms part of a crackdown by regulators worldwide against tax avoidance.

Special deals that slash multinationals' tax bills to little more than zero in some cases have come under closer scrutiny as governments struggle with declining revenues.

"Tax rulings that artificially reduce a company's tax burden are not in line with EU state aid rules. They are illegal. I hope that, with today's decisions, this message will be heard by Member State governments and companies alike," Vestager said in a statement.

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"All companies, big or small, multinational or not, should pay their fair share of tax," she added.

The Commission said Starbucks had benefited from a tax ruling from Dutch authorities in 2008 and Fiat from a ruling in Luxembourg in 2012. The Comission concluded that the taxable profits for Fiat's Luxembourg unit could have been 20 times higher under normal market conditions.

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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 and online retailer Amazon. More recently, it opened an inquiry into tax arrangements in Belgium.