Fiat Chrysler and Starbucks may owe up to €30 million (over $34 million) in taxes after they made illegal ‘sweetheart deals with European countries in order to receive tax breaks, the BBC reports.
Luxembourg made a deal with Fiat Chrysler to receive tax breaks, while Starbucks had a similar deal with the Netherlands. The European competition commissioner Margrethe Vestager says these breaks were state aid and were illegal by EU standards.
“Tax rulings that artificially reduce a company’s tax burden are not in line with EU state aid rules,” Vestager said. “They are illegal. I hope that, with today’s decisions, this message will be heard by member state governments and companies alike.”
The two countries disagree with the commission, while Starbucks said openly it would appeal against the decision. Certain tax rulings are legal in the EU, however the deals with Fiat Chrysler and Starbucks are said to have “transfer pricing arrangements” that allowed Starbucks move some of its profits abroad, and allow Fiat to pay taxes on profits well below its actual earnings.
Fiat’s taxable profits for its Luxembourg arm could have been 20 times higher if it weren’t for the illegal cuts, the commission said. The automaker is said to have paid just 400,000 in corporate tax last year in the country.
ActionAid, a company which works against poverty injustice, said the ruling on Fiat’s and Starbuck’s tax breaks were was “just the tip of the iceberg when it comes to corporate tax breaks”. Further investigations into tax cuts involving major corporations, including Amazon and Apple, are said to be ongoing.