European Union fines companies for colluding on disc drives deals

“I hope that, with today’s decisions, this message will be heard by member state governments and companies alike”.

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 Netherlands must now recoup between 20 million and 30 million euros ($23 million and $34 million) from Starbucks and Luxembourg as much from Fiat.

The two countries now were ordered to recover the unpaid tax from Starbucks and Fiat. Those tax rulings are not illegal per se, but have put big companies in a position to pay nearly no corporate taxes with the help of their subsidiaries in a few of Europe’s tax havens.

Vestager also said that the Commission is mulling whether to give more tax guidance to member states and she raised the possibility that binding rules could be imposed on companies in the future.

“It seems to us to be a serious matter for the commission to suggest that any revenue authority might issue any ruling which does not reflect economic reality”.

The EU’s executive branch, the Commission, has been tightening the loopholes in European Union law and Vestager underlined that it is investigating similar tax practices in all of the bloc’s 28 nations. She declined to say when she would rule on them.

Luxembourg said it disagreed with the commission, but would analyse the ruling first. “In fact, only Starbucks Manufacturing is required to pay for using this know-how – no other Starbucks group company nor independent roasters to which roasting is outsourced are required to pay a royalty for using the same know-how in essentially the same situation… the existence and level of the royalty means that a large part of its taxable profits are unduly shifted to Alki, which is neither liable to pay corporate tax in the United Kingdom, nor in the Netherlands”.

“The Netherlands is convinced that actual worldwide standards are applied”, the Dutch government said in a first reaction.

As a guardian of European laws and regulations, the European Commission has to ensure fair competition, the argument goes. But there is no fair competition when a few companies profit from preferential tax deals that aren’t available to their rivals.

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 fight against tax evasion and tax avoidance can only be won with a combination… of state aid rules and legislative responses”. Hundreds, possibly thousands, of companies have used Luxembourg’s holding-company rules to reduce their tax burden from the country’s official 29% rate to nearly nothing, according to documents disclosed a year ago by the Washington-based global Consortium of Investigative Journalists.