Apple Stakes Raised as EU Orders Starbucks, Fiat Tax Repayments
Here is the opening of this topical article on a complicated situation from Bloomberg:
Apple Inc. and Amazon.com Inc. got a preview of what the European Union may have in store for them after regulators ordered Starbucks Corp. and a Fiat Chrysler Automobiles NV unit to repay millions of euros in back taxes.
The EU said the coffee company and the Italian carmaker were handed illegal fiscal deals by the Netherlands and Luxembourg and ordered them to repay as much as 30 million euros ($34 million). Wednesday’s decision sets up a showdown with Apple and Amazon, which are also embroiled in the tax probe.
“These first two decisions may just be testing the waters to see what the reaction will be, before they start with the really big ones -- Apple and Amazon,” said Marc Sanders, a partner at Taxand, a global firm of tax advisers. The Apple and Amazon cases “will have the same results, potentially with higher recoveries.”
Starbucks, Fiat, Apple and Amazon may be the tip of the iceberg after revelations of widespread use of sweetheart tax deals hit the headlines last year. Documents leaked by a group of investigative journalists showed that Luxembourg alone struck hundreds of secret fiscal deals known as tax rulings with companies from around the world, from PepsiCo Inc. to Walt Disney Co. Amazon, which has more than 1,000 people working in the tiny nation, said in a U.S. filing in July that its taxes could increase following a negative EU decision.
“Tax rulings that artificially reduce a company’s tax burden are not in line with EU state-aid rules. They are illegal,” said Margrethe Vestager, the EU competition commissioner. “I hope that, with today’s decisions, this message will be heard by member state governments and companies alike. All companies, big or small, multinational or not, should pay their fair share of tax.”
The Dutch and Luxembourg tax authorities must work out the actual amounts to be recouped based on a method provided by the European Commission. The recovery orders may also have an impact across the Atlantic where tax credits can in theory be granted when multinationals repatriate earnings from subsidiaries, according to a U.S. Treasury Department official.
Companies should pay taxes where they do business, just like the rest of us. Nevertheless, the situation described in this article sounds complicated. The only clear winners in these situations appear to be the tax lawyers.
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