Eurodad reaction to European Court of Justice ruling on Starbucks and Fiat state aid case
Cracks in the broken tax system exposed as the European court rules that a tax deal between Luxembourg and Fiat was illegal state aid, while another between the Netherlands and Starbucks was not.
Today, the European Court of Justice ruled in two cases, in which the European Commission had alleged that EU Member States broke EU state aid rules by providing selective tax advantages to specific multinational corporations. In the case concerning Luxembourg and Fiat, the court ruled in favour of the European Commission, but in the case concerning the Netherlands and Starbucks, it ruled against.
In 2014, EU Commissioner Margrethe Vestager opened official state aid investigations into specific secret tax deals provided by Luxembourg and the Netherlands to Fiat and Starbucks respectively. In 2016, the Commission concluded that in both cases, the EU Member States had violated the EU state aid rules. Consequently, the Commission ordered Luxembourg and the Netherlands to recover €20-€30 million in unpaid tax from each company. Both cases were appealed to the European Court of Justice, which delivered its ruling today.
Tove Maria Ryding, Eurodad Tax Coordinator, said:
"Through its ruling in the case concerning Luxembourg and Fiat, the European Court of Justice has confirmed that secret tax deals between governments and multinational corporations can, in some cases, constitute illegal state aid. This is important. However, the fact that the court ruled against the Commission in the case concerning the Netherlands and Starbucks is a reminder that state aid rules are difficult to use as a tax collection mechanism.
"The cracks in our international tax system cannot be patched up with EU state aid rules. The only way to ensure that multinational corporations are taxed fairly and effectively is to throw the existing corporate tax rules in the bin and create a new and better system."
In addition to today’s ruling, the court is currently considering the tax-related state aid case concerning Ireland’s treatment of Apple. In this case, the Commission ordered Ireland to recover approximately €13 billion from the corporation.
"We are all affected when multinational corporations avoid large amounts of taxes. It means that our governments have less funding for schools and hospitals, and that small and medium enterprises have to pay higher tax rates than the multinational corporations with whom they’re trying to compete," Ms Ryding said.
New rules for international corporate taxation are currently being negotiated through a process being led by the Organisation for Economic Co-operation and Development (OECD). "While it’s positive to see that governments have finally admitted the corporate tax system is broken, we’re concerned that the negotiations seem focused on producing more sticking-plaster solutions, rather than carrying out a real fundamental reform and get to the root of the problem.
"With a tax system full of loopholes and all information relating to multinational corporations' tax payments being secret, more transparency is desperately needed. “We're all running around in the dark trying to find the companies that exploit the loopholes. We urgently need a rule that requires all multinational companies to publish basic information about where they do business and what taxes they pay in each country where they operate. This would allow all citizens to see which corporations are paying their share of taxes and which ones are not. The issue is currently on the EU’s political agenda, but some Member States are blocking progress," Ms Ryding concluded.
For more information or to organise an interview with Tove Maria Ryding, please contact:
Mary Stokes, Senior Communications Officer at Eurodad, on mstokes [at] eurodad.org
Notes to editors
Today's decisions by the European Court of Justice can be found here:
For more information about the European Commission's state aid case against the Netherlands regarding taxation of Starbucks
For more information about the European Commission's state aid case against Luxembourg regarding taxation of Fiat
For more information about the European Commission's state aid case against Ireland regarding taxation of Apple