In both cases, the companies approached local tax authorities to seek assurances that any used controversial tax structures would not be challenged.
These assurances often known as comfort letters were torn up by commissioner Margrethe Vestager, in charge of competition policy, who confirmed that the two tax rulings constituted illegal state aid.
The dispute over Starbuckss tax rulings revolves around the fact that “most of the profits of Starbucks’ coffee roasting company are shifted abroad, where it is also not taxed.” Meanwhile, Fiat’s financing company only paid taxes on underestimated profits.”
Read more about Starbucks:
- How employee engagement and respect drives gains for a business
- How Starbucks adapts to local tastes when going abroad
- Why is Starbuck so successful Attention to detail
The Financial Times estimated the groups likely additional tax bill could be about 30m ( £22m).
It said: Starbucks was paying an effective rate of 2.5 per cent, rather than the full Dutch corporate tax rate of 25 per cent. Estimates of Fiats tax are more vague. The commission is expected to say that Fiat Finance Europe was in effect paying a rate of about one per cent in Luxembourg, rather than 29 per cent. People involved say that means it will owe more than Starbucks, but not more than 200m.
Several European politicians have now called for stronger powers to tackle tax ruling programmes in member states. This follows on from the “Luxembourg Leaks” scandal, which exposed the scale on which such rulings were being granted.
Vestager said: I hope that with this decision, this message will be heard by member state governments and companies alike. All companies, big or small, multinational or not, should pay their fair share of tax.”