Landmark EU decision against corporate tax avoidance

Both Starbucks and Fiat have been ordered to pay between €20 million and €30 million in tax.

A probe by the European Commission found that Starbucks and Fiat had had “unduly reduced” tax bills and “unfair competitive advantage” in the Netherlands and Luxembourg respectively, the competition commissioner Margrethe Vestager said.

The decision equates corporate tax breaks to illegal government subsidies, a violation of the EU rules on state aid.

"Most of the profits of Starbucks' coffee roasting company are shifted abroad, where they are also not taxed, and Fiat's financing company only paid taxes on underestimated profits," said the Commission.

Now the Netherlands and Luxembourg can get back the full tax which should have been paid. Both will have two months to calculate the precise amount of tax to be recovered.

Last year, Starbucks' manufacturing arm paid less than €600,000 in corporate tax, while Fiat's finance and trade arm had a bill just shy of €400,000, according to EU calculations.

The Luxembourg tax deal was struck when the current Commission head Jean-Claude Juncker was the country’s prime minister. He says he was not party to the arrangement.

This was the first major decision on multinational tax avoidance. More high-profile cases are expected later this year, namely Apple’s tax arrangements in Ireland and those of Amazon in Luxembourg.

Officials from Luxembourg and the Netherlands disagreed with the findings. Starbucks said it would appeal.

"Starbucks has paid an average global effective tax rate of roughly 33% well above the 18.5% average rate paid by other large US companies", it said a statement.

Ms Vestager said the EU was ready to "fine anti-competitive behaviour anywhere in the world, if it harms European consumers".

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