In June 2014, the European Commission, the EU regulator on Competition Law, launched in-depth investigations into the system of tax rulings in various Member States including Luxembourg and the Netherlands. The European Commission, having heard arguments from all relevant parties, has found that Fiat and Starbucks have each benefited from illegal state aid arising out of tax rulings granted to them by Luxembourg and the Netherlands respectively. It has been estimated that the sums granted in illegal state aid (and interest) could total between EUR20-30m in each case.
Following these investigations, the Commission has concluded that, in each case, the Member States have granted to the company in question a fiscal advantage which was not compliant with EU Law. Under the Competition Law provisions of the TFEU, Members States are forbidden from granting “any aid…through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.” (Article 107(1)). The European Commission has reasoned that the methods of computing their respective domestic tax liabilities, as permitted in the tax rulings, differed significantly from the standard regime of corporation tax and granted Fiat and Starbucks an advantage in that they were able to significantly lower their tax burden. This, the Commission asserts, serves to distort the operation of the single market.
This article appears in the JHA November 2015 Tax Newsletter, which also features:
