All eyes on Apple after EU rules on Starbucks and Fiat

Expectation has intensified that the EU Commission is preparing an adverse ruling against Apple’s tax scheme in Ireland as the institution issued negative findings against Starbucks in the Netherlands and Fiat in Luxembourg.

In cases with big implications for the taxation of multinationals, commissioner Margrethe Vestager found Starbucks and Fiat benefited from illegal tax deals with the Dutch and Luxembourg governments. A ruling in the Apple case is expected in November, 16 months after the investigation was opened.

“There are questions to be asked about why it has taken the EU Commission a year and a half to deliver these rulings, and why the Apple investigation, announced at the same time, has not been concluded,” said Brian Keegan, director of taxation at Chartered Accountants Ireland.

“Normally the EU Commission scrutinises national laws to ensure compatibility with State Aid. Here it is examining the conduct of Revenue authorities in applying national laws.

“This is new territory for the commission. it seems to us to be a serious matter for the commission to suggest that any Revenue authority might issue any ruling which does not reflect economic reality.”

The Irish Government and Apple have always denied Apple received selective advantage from Revenue, but rulings against Starbucks and Fiat were seen in business and official circles to increase the likelihood of a negative decision in the Apple case.

Saying all firms must pay a “fair share”, Ms Vestager ordered the Netherlands to recover €20 million-€30 million in back taxes from Starbucks. Luxembourg must recover a similar amount from Fiat Chrysler Automobiles.

“We do not stop here”, the commissioner said, describing the Apple case and another inquiry into Amazon in Luxembourg as “very different”. The commission suspects each of these companies benefits from illegal state subsidies via the tax system, but she declined to say when she would rule on them.

Starbucks immediately said it would appeal, echoing the Dutch government in accusing the EU executive of significant “errors” in its assessment. Luxembourg said it disagreed and reserved its right to appeal.

Fiat denied receiving any aid from the Luxembourg state. Ms Vestager, formerly Denmark’s finance minister, denied accusations of anti-US bias in launching other tax inquiries into Apple and Amazon and competition inquiries into Google.

The issue, she said, was firms being treated differently within the same national system. “The decisions send a clear message,” she told reporters in Brussels. “National tax authorities cannot give any company, however large or powerful, an unfair competitive advantage compared to others. For most companies, especially the small and medium-sized, I hope this is a reassuring message.”

The commission said Starbucks benefited from a tax ruling – an assurance of future tax levels – from Dutch authorities in 2008 and Fiat from a ruling in Luxembourg in 2012.

It concluded that the taxable profits for Fiat's Luxembourg unit could have been 20 times higher under normal market conditions. Additional reporting: Reuters