EU executive targets dubious tax deals
October 20, 2015![CD on euro banknotes](https://static.dw.com/image/17995824_800.webp)
By highlighting the results of its investigations into two companies, the European Commission is putting out its feelers judicially. Italian carmaker Fiat and multinational corporation Starbucks are to receive a letter from EU Competition Commissioner Margrethe Vestager. She will tell them that their tax arrangements with the governments of Luxembourg and the Netherlands respectively are viewed by Brussels as illegitimate state aid.
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 some companies profit from preferential tax deals that aren't available to their rivals.
Only the tip of the iceberg
The EU executive had initially started probing six concrete cases of preferential tax arrangements. But hundreds more firms are affected and will soon receive similar mail in their letter boxes. It's all about companies having been given advance tax notice in Luxembourg, the Netherlands and Ireland. Those tax rulings are not illegal per se, but have put big companies in a position to pay almost no corporate taxes with the help of their subsidiaries in some of Europe's tax havens.
That practice had been branded as aggressive tax avoidance when it came to light in the wake of the LuxLeaks affair and the publication of sensitive tax documents. Since then, the EU executive has called on all member states in the bloc to submit their advance tax notice documents to Brussels.
Millions of euros to be paid back
Starbucks is expected to get off the lightest, facing back taxes of some 30 million euros ($34 million). Through its Dutch subsidiary Starbucks Manufacturing, the company is reported to have paid only 2.5 percent in corporate taxes instead of the official 25 percent due in the country.
But for Fiat, it ought to turn out a much costlier affair. Luxembourg-based Fiat Chrysler Finance Europe has obviously paid only 1 percent effectively in corporate taxes instead of the regular 29 percent.
Observers can't wait to see the next big cases made public. The Competition Commissioner has also ordered a probe into the tax practices of retail giant Amazon and technology behemoth Apple. And those two firms are likely to be asked to pay back a lot more.
New rules against tax avoidance
A set of new rules came into effect at the beginning of October. Responding to the LuxLeaks revelations, EU finance ministers agreed on the automatic exchange of tax data in a bid to make public the taxation of big companies and head off competition for the best tax haven in the bloc.
Sven Giegold, a member of the European Parliament for the Green Party, has been in the forefront of the fight for tax justice in dealing with multinational companies.
"It's all about competition fairness and justice," he said. "It can't be tolerated if some companies are particularly resourceful in avoiding taxes. The European Commission is called upon to secure a level playing field for all."
Giegold expects the companies concerned to appeal against the claims levied against them. Litigation procedures may well drag on for many years. The MEP wants any money eventually recouped to be funnelled into the pan-EU budget rather than being channeled back to individual nations
"It would be absurd to see the recouped money go back directly to the very countries which facilitated the preferential tax deals in the first place."
Ongoing affair
Giegold wants the mandate for the current inquiry to be extended - a mandate, which would otherwise expire towards the end of November.
He says the investigating committee has only now got access to important taxation documents shedding more light on the various tax avoidance schemes in a number of member states. Giegold insists investigations into the matter be continued unabated.