The European Union’s anti-trust regulator said Wednesday it is launching an investigation into tax deals that Apple, Starbucks and Fiat struck with several European countries to see whether they violate competition law.
EU antitrust commissioner Joaquin Almunia said it appears the arrangements are not proper, though the companies and countries involved Ireland, the Netherlands and Luxembourg must be given a chance to respond.
“In the current context of tight public budgets, it is particularly important that large multinationals pay their fair share of taxes,” he said in a statement.
Apple has a deal with tax authorities in Ireland, Starbucks in the Netherlands and Fiat’s financing arm in Luxembourg as part of their strategy to minimize the taxes they pay.
Almunia said that while such agreements are permissible in theory, they would be improper if they give the companies an advantage over competitors.
The companies named have been frequent targets of criticism for paying low taxes in some countries they operate.
The countries have also been criticised Ireland for its low tax rates, the Netherlands and Luxembourg as homes for shell companies, and all three for secrecy.
Almunia said the three investigations announced Wednesday are part of a wider look into tax rules in various EU countries and “aggressive” tax planning by multinationals, which he said erodes countries’ tax bases. He named Belgium as another country whose tax rules his office is examining.
“Why three companies today? Because we are starting,” he said at a press conference in Brussels.
Ireland was quick to respond, issuing a statement that it is “confident that there is no state aid rule breach in this case and we will defend all aspects vigorously.”
Almunia was at pains to say he is not criticising the countries’ overall tax regimes. He said the issue in question involves ‘transfer pricing’ where a company allows one part of its operations to charge another for goods or services in one country in order to shift profits where it wants.
For instance, Starbucks might charge its own subsidiaries a license fee for using its logo. If it keeps its European licensing arm in the Netherlands and then funnels all the licensing fees there, it could have high profits there and low profits elsewhere.
The Commission said that sort of strategy is only allowable if the prices a company charges its subsidiaries conform to market rates. Otherwise, the companies could lowball their overall taxable profit, giving them an advantage.
