Starbucks wins, Fiat loses in EU tax fights

The EU has so far failed to prove Starbucks benefited from tax breaks. (AFP)
Updated 25 September 2019

Starbucks wins, Fiat loses in EU tax fights

  • EU fails to show Starbucks benefited unfairly

LUXEMBOURG: Starbucks won its fight on Tuesday against an EU demand to pay up to €30 million ($33 million) in Dutch back taxes, while Fiat Chrysler Automobiles lost its challenge against an order to stump up a similar amount to Luxembourg.

Both cases were part of European Competition Commissioner Margrethe Vestager’s crackdown on unlawful tax breaks offered by EU countries to multinationals, which has also extended to Apple’s Irish deal and Amazon’s Luxembourg deal, among others.

The judgments show that the General Court, Europe’s second-highest, generally endorses the European Commission’s methodology in its tax crackdown but stipulates the Commission must do its homework properly to prove its case — a bad omen for Apple fighting a record €13 billion Irish tax order.

It is an important victory for the Commission, said Dimitrios Kyriazis, head of Law at New College of the Humanities London.

“Regardless of the outcome of individual cases, the General Court seems to have sanctioned the Commission’s approach,” he said.

In Starbucks’ case, the EU competition enforcer failed to show the coffee chain benefited unfairly from the Dutch tax deal.

“The Commission was unable to demonstrate the existence of an advantage in favor of Starbucks,” judges said.

The Dutch Finance Ministry said the judgment showed it was treated the same as other companies.

Starbucks also welcomed the ruling, saying it had not received any special treatment from the Netherlands and that it “pays all of its taxes wherever they are due.”

In a separate ruling, the Court upheld the Commission’s decision against Fiat’s Luxembourg’s tax deal, saying that the Commission had applied its state aid rules correctly to assess if there was an illegal advantage and was not seeking to harmonize tax rules across the bloc.

It also agreed with the Commission’s finding that the Luxembourg tax ruling was a selective one, meaning that such rulings were not available to all companies.

The Commission said in 2015 Starbucks and Fiat Chrysler set prices for goods and services sold between subsidiaries, known as transfer prices, that were below market rates and which artificially lowered their taxes.

The losing side can appeal to the Court of Justice of the EU.

Luxembourg, the Netherlands and Ireland are among countries whose economies have benefited from attracting multinationals. They have amended their tax regimes in recent years following the EU tax drive.

The European Commission is currently investigating Ikea AB and Nike Inc’s Dutch deals and Huhtamaki Oyi’s Luxembourg tax ruling.


ADNOC wants its flagship crude as global benchmark

Updated 38 min 8 sec ago

ADNOC wants its flagship crude as global benchmark

  • Abu Dhabi oil giant’s ambitious call comes amid falling Brent volumes and new UAE exchange plan

ABU DHABI: Abu Dhabi National Oil Co. (ADNOC) is aiming to have its Murban futures contract eventually replace North Sea benchmark Brent whose volumes are declining, an ADNOC executive said on Tuesday.

Intercontinental Exchange Inc. plans to launch a new exchange in the UAE, ICE Futures Abu Dhabi (IFAD), in the first half of 2020 to host ADNOC’s flagship Murban crude grade.

“We want to give the industry Murban as a replacement for Brent crude futures,” Philippe Khoury, head of trading at ADNOC group, told an energy conference in the UAE capital Abu Dhabi.

“We still have to demonstrate that over time the community can trust the crude as a benchmark,” he added.

Oil majors BP, Total, Inpex, Vitol , Shell, Petrochina, Korea’s GS Caltex, Japan’s JXTG and Thailand’s PTT have agreed to become partners in the new exchange.

Vitol CEO Russel Hardy said that it will take time to build liquidity on the new exchange, and that Brent, a basket of different crude qualities, and US West Texas Intermediate (WTI) were very established.

“There is a great deal of different constituents playing in those markets. These things will take time to build up on the exchange here,” he said at the same panel discussion.

“It is right to have that level of ambition but it will take some time to build that level of liquidity,” he said of ADNOC’s plans for Murban.

The new contract will create an alternative benchmark to the most commonly used Middle East standard, the Dubai/Oman benchmark operated by the Dubai Mercantile Exchange (DME) and traded on CME’s electronic platform.

Abu Dhabi’s Supreme Petroleum Council last week approved the launch of a new pricing mechanism for Murban crude as part of ADNOC’s broader transformation strategy. It authorized the state energy firm to remove destination restrictions on Murban sales.

ADNOC plans to implement new Murban forward pricing between the second quarter and third quarter of 2020.

UAE Energy Minister Suhail Al-Mazrouei said earlier on Tuesday that he saw no conflict between his country’s compliance with OPEC output cuts and plans to list Murban.

He said the UAE remained committed to cuts agreed by the Organization of the Petroleum Exporting Countries, plus allies led by Russia. These countries have since January implemented a deal to cut output by 1.2 million barrels per day (bpd) which lasts until March 2020, in an attempt to boost prices.

“I don’t think there is a conflict in floating Murban with the fact that UAE is going to comply with whatever we agree to with OPEC. I am not worried about that,” Mazrouei said.

Murban light crude output is around 1.6-1.7 million barrels per day. The UAE has traditionally sold oil directly to end-users, mainly in Asia, based on retroactive pricing rather than forward pricing used by Saudi Arabia, Kuwait and Iraq.

The UAE, the third-largest OPEC producer behind Saudi Arabia and Iraq, pumps around 3 million bpd, produced mostly by ADNOC.