Selective tax advantages ruled illegal by commission

The European Commission has ruled that Luxembourg and the Netherlands have granted selective tax advantages to Fiat Finance and Trade and Starbucks respectively. In each case a tax ruling issued by the respective national tax authority endorsed artificial and complex methods to establish taxable profits for the companies. The commission decided these did not reflect economic reality.

The methods artificially lowered the tax paid by the companies by setting prices for goods and services sold between companies of the Fiat and Starbucks groups that did not correspond to market conditions. As a result most of the profits of Starbucks were shifted abroad where they were also not taxed and Fiat’s financing company paid taxes on underestimated profits.

The commission has ordered Luxembourg and the Netherlands to recover the unpaid tax from Fiat and Starbucks and to restore equal treatment with other companies in...