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Fiat Chrysler Loses Appeal Against $33 Million E.U. Tax Fine E.U. Court Orders Fiat Chrysler to Pay Back $33 Million in Taxes
(about 8 hours later)
LUXEMBOURG — The second-highest court in the European Union ruled on Tuesday that the automaker Fiat Chrysler must pay back about $33 million in taxes that it saved by carving out a deal with Luxembourg, in a case that could have implications for a multibillion-dollar suit against Apple. LUXEMBOURG — The second-highest court in the European Union ruled on Tuesday that the automaker Fiat Chrysler must pay back about $33 million in taxes that it saved by carving out a deal with Luxembourg, a decision that could have implications in cases involving other global corporations, including a multibillion-dollar suit against Apple.
While Fiat Chrysler lost its appeal against the fine, the European Union General Court upheld Starbucks’s appeal in a case against a tax deal struck with the Netherlands, meaning the American coffee giant avoided a similar penalty. But the European Union General Court upheld an appeal in a similar case in which Starbucks struck a tax deal with the Netherlands, allowing the American coffee giant to avoid repaying 25.7 million euros in taxes.
The cases offered clues about what might happen with an enormous suit against Apple, which is accused by the European Commission of having unlawfully saved $14.5 billion in taxes by striking a similar deal with Ireland. Both cases offered clues about what might happen with an enormous suit against Apple, which is accused by the European Commission of having unlawfully avoided $14.5 billion in taxes by striking a similar deal with Ireland. The cases solidify the commission’s power to determine the legality of member states’ tax deals with companies and, if they are ruled illegal, to order states to recoup those taxes.
The commission, the European Union’s executive branch, has proved to be a formidable regulator and has claimed that such preferential deals breach the bloc’s competition law. The commission, the European Union’s executive branch, has proved to be a formidable regulator and has claimed that some preferential deals breach the bloc’s competition law.
The Apple case is seen as a consequential test for Margrethe Vestager, the European commissioner for competition. Ms. Vestager’s role was expanded this month, making her the world’s most powerful regulator. She will continue as antitrust commissioner but will have additional powers as digital and technology regulator in issues like data privacy, cybersecurity and artificial intelligence. Starting Nov. 1, Ms. Vestager will be able to make rules that affect tech firms and initiate cases when she thinks those rules are being broken.
On Tuesday, the European Union court ruled for the first time that the commission has the power to verify whether tax rulings granted by member states to individual companies confer an advantage under national law and therefore are in breach of European competition law. If an advantage is proved, such tax rulings should be considered illegal state aid, the court ruled, incompatible with the rules of the bloc’s internal market.
The court also upheld the commission’s calculation of €30 million in illegal state aid granted to Fiat Chrysler, and cleared the way for Luxembourg to recuperate the money immediately.
Fiat did not publicly respond to the ruling on Tuesday. It can appeal to the European Court of Justice, the highest court in the bloc. Luxembourg’s Finance Ministry said it would take time to “analyze the judgment.”
In a similar case involving a deal Starbucks made with the Netherlands, the court again upheld the commission’s jurisdiction over selective tax rulings. But it annulled a €25.7 million fine, saying that the commission did not sufficiently demonstrate any advantage for Starbucks under Dutch law.
“It is good that we now have clarity,” Menno Snel, a Dutch junior minister for finance, said in a response to the ruling.
The Netherlands “did not treat Starbucks any differently or more favorably than other companies,” he said. But he conceded that illegal tax avoidance schemes must be tackled and that “it is therefore appropriate that the commission should examine the tax treatment of individual companies as part of its state aid investigations.”
Fiat had appealed a lower-court ruling of its case, which deemed its tax deal with Luxembourg illegal. In its appeal, it argued that the ruling may lead to a de facto retroactive fine for companies operating in what they consider to be a legal environment. The General Court rejected that argument, saying the recouped taxes do not “breach the principle of legal certainty or infringe the rights of the defense.”
But Starbucks’s appeal, which was upheld, also sets a high standard for the commission to prove that an illegal advantage has been granted by a national tax ruling.
“The court rulings prove the strengths and weaknesses of using the E.U.’s state aid rules to fight tax dumping,” said Sven Giegold, a member of the European Parliament and spokesman for financial affairs for the Greens party.
“We should not have to rely on lengthy commission investigations and court decisions to achieve tax justice,” he said, adding that European state aid rules should be improved.
The commission started investigating Fiat Chrysler’s tax deal shortly after the Washington-based International Consortium of Investigative Journalists in 2014 revealed thousands of pages of confidential information detailing secret tax rulings by Luxembourg for hundreds of multinational corporations from 2002 to 2010.