EU Expected to Rule That Starbucks, Fiat Benefited from Illegal Tax Deals Next Week - Mercedes Benz SLK Forum
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#1 Old 10-15-2015
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EU Expected to Rule That Starbucks, Fiat Benefited from Illegal Tax Deals Next Week

Does that make you a Partner of Crime if you order a low fat Latte and zip away in your Fiat in morning Rush Hour?

Updated Oct. 15, 2015 7:26 a.m. ET
BRUSSELS—The European Union is expected to rule as soon as next Wednesday that Starbucks Corp. and Fiat Chrysler Automobiles have benefited from illegal tax deals in Europe, wrapping up the first two of four high-profile tax investigations that were launched by the bloc last year.

The move, on the heels of a decision by the EU’s top court to strike down a trans-Atlantic data pact, is likely to heighten the uncertainty for U.S. multinationals operating in Europe.

After more than a year of investigation, the EU’s antitrust authority has decided that tax deals granted to Starbucks in the Netherlands and Fiat in Luxembourg violated EU law, which prohibits governments from supporting some companies and not others, people familiar with the matter said.

The antitrust regulators are now seeking feedback from other departments within the European Commission, the EU’s executive arm, the people said. The commission is expected to announce its decision on Oct. 21 following a meeting of the EU’s top officials, the people said.

The EU could demand that Starbucks and Fiat pay back taxes that it deems should have been paid in the past, though it isn’t yet clear whether regulators will do so. If so, the demands could be substantial, EU officials have said.

Fiat and the commission declined to comment.

A spokesman for Starbucks said the company is cooperating with EU regulators. He said the company complies “with all relevant rules, laws and OECD guidelines” and pays a global effective tax rate of around 33%.

The EU’s decisions can be appealed at the bloc’s highest courts in Luxembourg by any interested party, including the companies, their competitors or EU governments, a process that often lasts for years. The investigations are technically directed at the governments involved, which might be asked to recoup any unpaid taxes, but won’t face punitive measures from Brussels.

It isn’t yet clear when the EU will conclude two other investigations involving Apple Inc.’s tax affairs in Ireland and Inc.’s in Luxembourg.

All of the companies have denied receiving special treatment, and the governments have denied giving it.

Margrethe Vestager, the EU’s antitrust chief, has postponed a trip to China this week to deal with “important matters requiring her presence and full attention in Brussels,” the commission said in an emailed statement on Thursday.

The four probes were announced last year amid a push by European governments to bolster national coffers that have been hit hard by the region’s financial crisis, and to assure citizens that the biggest corporations are paying their fair share of tax.

Since then, Ireland has done away with its so-called double-Irish tax scheme, while Luxembourg has changed the way it handles tax deals with multinationals.

Ms. Vestager welcomed those changes in an interview in February.

“I do not have an issue with specific countries or companies, what I’m interested in are schemes which allow for preferential treatment, for selectivity,” she told The Wall Street Journal.

The EU has made a priority of the probes, and Ms. Vestager had pledged to reach a decision on all four by June. That deadline was missed, however, and Ms. Vestager hasn’t given a new deadline.

The tax investigations are politically sensitive in Brussels because European Commission President Jean-Claude Juncker was Luxembourg’s prime minister when the tax deals were in force.
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