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| E.U. Orders 2 Nations to Recover Taxes From Starbucks and Fiat | |
| (35 minutes later) | |
| BRUSSELS — The European Union on Wednesday ordered the Dutch government to recover money from Starbucks and told Luxembourg to claw back funds from a Fiat Chrysler unit, in an expanding crackdown on tax avoidance by corporations. | BRUSSELS — The European Union on Wednesday ordered the Dutch government to recover money from Starbucks and told Luxembourg to claw back funds from a Fiat Chrysler unit, in an expanding crackdown on tax avoidance by corporations. |
| Margrethe Vestager, the antitrust chief of the European Union, said that Luxembourg and the Netherlands had given the multinational corporations illegal state aid by letting them shift profits and pay lower tax rates than those available to other companies. | Margrethe Vestager, the antitrust chief of the European Union, said that Luxembourg and the Netherlands had given the multinational corporations illegal state aid by letting them shift profits and pay lower tax rates than those available to other companies. |
| The decisions are a sign of Europe’s determination to counter increasingly sophisticated tax strategies used by multinational companies. And the actions by Ms. Vestager could be just the first of a series of enforcement moves by her office, which has been investigating tax arrangements that some European countries have used to attract multinational companies, including big American technology companies like Apple in Ireland and Amazon in Luxembourg. | |
| Other European Union members say the arrangements often amount to unfair competition that deprives them of tax revenue. And American officials have raised questions about whether some multinationals are using European tax shelters to avoid paying their full share of taxes in the United States. | |
| Luxembourg must now recover up to 30 million euros, or about $34 million, from the Fiat unit, Fiat Finance and Trade. The Netherlands must retrieve a similar amount from Starbucks. | Luxembourg must now recover up to 30 million euros, or about $34 million, from the Fiat unit, Fiat Finance and Trade. The Netherlands must retrieve a similar amount from Starbucks. |
| The Dutch and Luxembourg governments said they disagreed with the ruling and indicated that they might appeal it. The companies did not immediately comment. | The Dutch and Luxembourg governments said they disagreed with the ruling and indicated that they might appeal it. The companies did not immediately comment. |
| Asked on Wednesday about the investigations involving Amazon and Apple, Ms. Vestager told a news conference that those were “very different cases,” and she declined to give a date for decisions. | |
| “More cases may come if we have indications that E.U. state-aid rules aren’t complied with,” Ms. Vestager said, referring to other investigations into tax deals between European countries and companies. | “More cases may come if we have indications that E.U. state-aid rules aren’t complied with,” Ms. Vestager said, referring to other investigations into tax deals between European countries and companies. |
| Ms. Vestager’s office has been scrutinizing so-called tax rulings — essentially negotiated assurances that national authorities give to individual companies about the taxable value of profits and losses moved between subsidiaries. | Ms. Vestager’s office has been scrutinizing so-called tax rulings — essentially negotiated assurances that national authorities give to individual companies about the taxable value of profits and losses moved between subsidiaries. |
| The practices are increasingly seen as suspect by larger countries like France and Germany, where officials say the rulings allow companies to shift profits to nations that offer much more attractive tax rates. | The practices are increasingly seen as suspect by larger countries like France and Germany, where officials say the rulings allow companies to shift profits to nations that offer much more attractive tax rates. |
| While low across-the-board taxes are not a violation of European Union rules, special deals offered to some companies that are not available to all businesses in the country can be judged illegal. | While low across-the-board taxes are not a violation of European Union rules, special deals offered to some companies that are not available to all businesses in the country can be judged illegal. |
| Some legal experts said they expected many additional tax rulings from Ms. Vestager’s office, and for at least some big corporations to start rethinking their European tax strategies. | |
| “We are potentially looking at hundreds of multinationals across the European Union that get these tax rulings, especially in smaller states, so this decision creates a lot of insecurity for corporations, especially those with such operations in smaller states,” said Annette Schild, the founder of the ALSchild law firm in Brussels, who is not involved in the tax rulings cases. “I don’t think the E.U. authorities are going to stop with two or three companies, and the mere threat of enforcement action is going to lead companies to change their ways.” | |
| But the governments will not necessarily bow to Ms. Vestager’s rulings, if the reactions from the Netherlands and Luxembourg are an indication. | |
| “The Dutch cabinet is somewhat surprised about the decision of the European Commission that Starbucks would have received state aid,” a statement posted on the government’s website said. | “The Dutch cabinet is somewhat surprised about the decision of the European Commission that Starbucks would have received state aid,” a statement posted on the government’s website said. |
| “The fact that the commission observes that there would be state aid in the Starbucks file raises a lot of questions and requires careful consideration,” the government said, indicating it would ‘‘analyze the commission’s criticism carefully before taking a decision on further steps.” | “The fact that the commission observes that there would be state aid in the Starbucks file raises a lot of questions and requires careful consideration,” the government said, indicating it would ‘‘analyze the commission’s criticism carefully before taking a decision on further steps.” |
| There was a sharper reaction from Luxembourg, which has grown rich in recent decades as a base for the sort of financial services that the Fiat unit provides. | There was a sharper reaction from Luxembourg, which has grown rich in recent decades as a base for the sort of financial services that the Fiat unit provides. |
| The finance minister of Luxembourg, Pierre Gramegna, said on his Twitter account that his country “disagrees with the conclusions reached by the European Commission in the Fiat Finance and Trade case, and reserves all its rights.” | The finance minister of Luxembourg, Pierre Gramegna, said on his Twitter account that his country “disagrees with the conclusions reached by the European Commission in the Fiat Finance and Trade case, and reserves all its rights.” |
| That appeared to be a thinly veiled threat to appeal Ms. Vestager’s decision to the Court of Justice of the European Union in Luxembourg, the bloc’s highest tribunal. | That appeared to be a thinly veiled threat to appeal Ms. Vestager’s decision to the Court of Justice of the European Union in Luxembourg, the bloc’s highest tribunal. |
| But if Luxembourg and the Netherlands refuse to act on Ms. Vestager’s decision, the European Commission, the bloc’s executive arm, might itself elect to sue the countries at the Court of Justice. | But if Luxembourg and the Netherlands refuse to act on Ms. Vestager’s decision, the European Commission, the bloc’s executive arm, might itself elect to sue the countries at the Court of Justice. |
| Ms. Vestager’s order for the Netherlands and Luxembourg to recover back taxes might be deemed a windfall in an era of shrinking national budgets and weak economic growth. But the relatively small amounts are unlikely to offset the drawbacks, as viewed by countries like Luxembourg and the Netherlands that have used low-tax inducements to compete for jobs and foreign investment in an increasingly competitive world. | Ms. Vestager’s order for the Netherlands and Luxembourg to recover back taxes might be deemed a windfall in an era of shrinking national budgets and weak economic growth. But the relatively small amounts are unlikely to offset the drawbacks, as viewed by countries like Luxembourg and the Netherlands that have used low-tax inducements to compete for jobs and foreign investment in an increasingly competitive world. |
| “These are not spectacular sums, but that is not the message here,” said Ms. Vestager, referring to the money that Luxembourg and the Netherlands need to recover from Starbucks and the Fiat unit. Ms. Vestager said her aim was curbing corporate pricing arrangements that “have no relationship with the market” and that “twisted” European rules aimed at limited state aid. | “These are not spectacular sums, but that is not the message here,” said Ms. Vestager, referring to the money that Luxembourg and the Netherlands need to recover from Starbucks and the Fiat unit. Ms. Vestager said her aim was curbing corporate pricing arrangements that “have no relationship with the market” and that “twisted” European rules aimed at limited state aid. |
| Ms. Vestager has said that the arrangements often lack a genuine commercial basis, and that they are biased against start-up companies and small and midsize businesses that cannot afford the advice required for complex tax structuring. | Ms. Vestager has said that the arrangements often lack a genuine commercial basis, and that they are biased against start-up companies and small and midsize businesses that cannot afford the advice required for complex tax structuring. |
| Some of the practices have also drawn criticism from American lawmakers who, two years ago, identified Apple subsidiaries that have no “tax residency” in Ireland, where they are incorporated, nor in the United States, where the executives who manage those units are based. | Some of the practices have also drawn criticism from American lawmakers who, two years ago, identified Apple subsidiaries that have no “tax residency” in Ireland, where they are incorporated, nor in the United States, where the executives who manage those units are based. |
| The investigations into Starbucks in the Netherlands and Fiat Finance and Trade in Luxembourg were announced in June 2014 by Ms. Vestager’s predecessor, Joaquín Almunia. He had warned that tax avoidance was making it more difficult for governments to manage their budgets. | The investigations into Starbucks in the Netherlands and Fiat Finance and Trade in Luxembourg were announced in June 2014 by Ms. Vestager’s predecessor, Joaquín Almunia. He had warned that tax avoidance was making it more difficult for governments to manage their budgets. |