EU rules tax breaks for Fiat and Starbucks illegal

The EU decision was released Wednesday following investigations launched in June 2014.

It ruled Luxembourg granted selective tax advantages to Fiat's financing company and the Netherlands to Starbucks' coffee roasting company.

Both companies will have to pay between €20m and €30m in back taxes, as had been predicted earlier in the week, and will no longer be able to benefit from tax rulings.

Analysts predict the rulings will be the tip of the iceberg, with potentially larger decisions against Apple and Amazon also on the way.

The EC said while tax rulings are perfectly legal, the rulings under investigation endorsed artificial and complex methods to establish taxable profits for the companies and did not reflect economic reality.

“Tax rulings cannot use methodologies, no matter how complex, to establish transfer prices with no economic justification and which unduly shift profits to reduce the taxes paid by the company,” the Comission said.

“It would give that company an unfair competitive advantage over other companies (typically SMEs) that are taxed on their actual profits because they pay market prices for the goods and services they use.”

The EU’s competition commissioner Margrethe Vestager said all companies need to pay their fair share of tax, regardless of the size of the company.

“I hope that, with today's decisions, this message will be heard by Member State governments and companies alike.”