EC competition watchdog to rule today on landmark tax avoidance case

21 October 2015

The European Commission's competition regulator is expected to rule today on a landmark tax avoidance case, with auto major Fiat facing around 150 million in tax repayments and Starbucks around 20 million.

The EU had launched four tax probes announced last year after the LuxLeaks affair which revealed a number of the world's biggest companies had negotiated lower tax rates, in a few cases just 1 per cent, in secret pacts with Luxembourg.

A ruling against Fiat and Starbucks could mean, the auto major's financial arm, based in Luxembourg, and the European unit of US coffee-shop outlet Starbucks in the Netherlands, would be required to pay millions of euros in back taxes.

According to lawyers and other persons involved in the cases, EC commissioner Margrethe Vestager was more concerned with establishing tough measures to counter certain types of aggressive tax avoidance than imposing heavy financial penalties on Fiat and Starbucks.

According to the report of the probes, the Netherlands and Luxembourg would probably receive detailed descriptions from the Commission telling them how to calculate the uncollected taxes, rather than a precise amount.

Automaker Fiat Chrysler denied it received state aid from Luxembourg ahead of an expected ruling by the EU's competition watchdog that the company must pay millions in back taxes.

Fiat Chrysler said in a statement yesterday that an agreement it reached with the government of Luxembourg was aimed only at clarifying pricing rules and ''did not result in any state aid.''

According to one official, Fiat and Starbucks were only ''the tip of the iceberg'', and the decision had shone the spotlight on the likes of Amazon and Google, which had been criticised in the past for their tax arrangements, reported.

Deals helping companies slash their tax bills, giving them an unfair advantage, had been in regulators' crosshair after the global financial crisis of 2007-2009 left governments strapped for cash.

All 28 EU member states had been told to hand over their tax rulings for examination by the commission.

All of the countries and companies involved in the first four cases Starbucks in the Netherlands, Apple in Ireland and Fiat and Amazon in Luxembourg insist there had been no wrongdoing. ''If it's adverse, we think it's based on very thin legal grounds and we'll have it before the European Court of Justice'', the official said.

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