The European Commission ruled on Wednesday that Starbucks Corp and Fiat Chrysler Automobiles benefited from illegal tax deals with the Dutch and Luxembourg authorities, sending shock waves to MNCs who have been using such profit-shielding tax deals in the past.
According to Reuters, Antitrust commissioner Margrethe Vestager had stated that all firms must pay a "fair share" and ordered the Netherlands to recover 20 million to 30 million euros ($23 million to $34 million) in back taxes from the popular U.S. coffee chain.
And that Luxembourg must recover a similar amount from Italian-U.S. carmaker Fiat.
The report states that bigger impact lies ahead for global corporations whose strategies to avoid tax are under attack on various fronts from cash-strapped governments.
Starbucks has apparently said they would appeal against the judgement and stressed that Starbucks has paid over $3bn in global taxes over the seven-year period in question from 2008-2014.
Luxembourg - affected by the ruling since much of the economy has been built on attracting multinational firms - has disagreed with the ruling and has reserved all its rights, a Reuters report claimed.
Fiat has denied receiving any aid from the Luxembourg state whilst Vestager has denied launching other tax probes into US companies like Apple and Amazon.
Reuters meanwhile added that competition inquiries into Google Inc are also taking place. And that Vestager had added that "the decisions send a clear message that National tax authorities cannot give any company, however, large or powerful, an unfair competitive advantage compared with others" and that "for most companies, especially the small and medium-sized, I hope this is a reassuring message."
The Commission had stated that Starbucks had benefited from a tax ruling - an assurance of future tax levels - from Dutch authorities in 2008 and Fiat from a ruling in Luxembourg in 2012. It concluded that the taxable profits for Fiat's Luxembourg unit could have been 20 times higher under normal market conditions.
The precise sum to be paid must now be set by Luxembourg and the Netherlands on the basis of the Commission's methodology.
Vestager elaborates further, "We cannot achieve fair tax competition in Europe with enforcement of EU state aid rules alone," and that "the fight against tax evasion and tax avoidance can only be won with a combination ... of state aid rules and legislative responses".
Fiat's Luxembourg unit paid "not even" 0.4 million euros in corporate tax last year and that Starbucks' Dutch subsidiary less than 0.6 million euros.
Meanwhile, Starbucks said it paid an average global effective tax rate of about 33 percent.
"Starbucks shares the concerns expressed by the Netherlands government that there are significant errors in the decision, and we plan to appeal since we followed the Dutch and OECD rules available to anyone", said the company spokesman.
Join the Conversation