EU loses big Starbucks tax case, wins on Fiat

The European Union General Court ruled on Tuesday that US coffee chain Starbucks does not have to pay 30 million euros ($33 million) in taxes to the Netherlands but Italian carmaker Fiat will have to pay a similar amount in back taxes to Luxembourg.

The rulings are viewed significant for iPhone maker Apple, which is battling a ruling that it pay a record $13 billion euros in taxes to Ireland.

The companies can now appeal the rulings in the EU's highest court, the European Court of Justice.

The Tuesday rulings came after the European Commission, led by its commissioner for competition Margrethe Vestager, decided in 2015 that the two companies had received illegal tax benefits provided from the governments of the Netherlands and Luxembourg.

Vestager alleged then that Fiat's Luxembourg unit paid "not even" 400,000 euros in corporate tax in 2014 and Starbucks' Netherlands' unit paid less than 600,000 euros. The commission thus ordered both countries to recover between 20 million and 30 million euros from each of the two companies.

"All companies, big or small, multinational or not, should pay their fair share of tax," Vestager said in announcing the decisions in 2015. The 51-year-old Danish politician was nominated this month by European Commission President-elect Ursula von der Leyen as the commission's executive vice-president while retaining the job as competition commissioner.

The Luxembourg-based court agreed with the commission's decision that the tax breaks Luxembourg provided to the financing company of Fiat had artificially lowered its taxes and constituted illegal state aid.

However, it found the tax conditions the Netherlands offered Starbucks were comparable to that offered to other companies. The court said the commission was "unable to demonstrate the existence of an advantage in favor of Starbucks" from a so-called "sweetheart" corporate tax arrangement for the company in the Netherlands.

The rulings are viewed as vital for a series of similar cases and especially for Apple, which has been battling at the EU General Court to revoke the record 13 billion euro tax order.

In the Apple case, the European Commission in 2016 said Ireland illegally slashed the iPhone maker's tax bill between 2003 and 2014, a finding the company and Irish officials rejected. The Irish government has been challenging the ruling in EU courts.

The EU alleged that "Apple paid essentially no tax on earnings in Europe" and "sought headlines by quoting tiny numbers, but this public campaign ignores the taxes Apple pays all across the world," Apple attorney Daniel Beard said at last week's hearing, according to Bloomberg.

The European Commission has analyzed more than 1,000 tax rulings in all 28 member states since 2014, including tax arrangements relating to about 300 companies, according to the Financial Times. It still has 42 ongoing investigations, with expectations that more cases will be opened in the next five years in attempts to force EU member states to recover billions in taxes.