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.

South Korea seeks arrest of Samsung heir in succession probe

Updated 46 sec ago

South Korea seeks arrest of Samsung heir in succession probe

  • Jay Y. Lee faces a return to jail just a little over two years after being released from detention

SEOUL: South Korean prosecutors have requested an arrest warrant against Samsung Group heir Jay Y. Lee, they said on Thursday, in the investigation of a controversial 2015 merger and alleged accounting fraud in a suspected bid to aid his succession plans.
The move spells fresh trouble for Lee, who, if arrested, faces a return to jail just a little over two years after being released from detention in February 2018.
Lee already faces trial on a charge of bribery aimed at winning support to succeed ailing group patriarch Lee Kun-hee, and which involved former President Park Geun-hye, and spent a year in detention until the bribery case was suspended in 2018.
Prosecutors said they sought Lee’s arrest on suspicions of stock price manipulation and audit rule violations, among other offenses.
In a statement, Lee’s lawyers expressed “deep regret” at the prosecution’s decision to seek his arrest, adding that he had fully cooperated with the investigation while Samsung was going through management crises.
Prosecutors have been investigating suspected accounting fraud at drug company Samsung Biologics after the Korean financial watchdog complained the firm’s value had been inflated by $3.7 billion in 2015.
Prosecutors contend the violation helped boost the value of its major owner, Cheil Industries, which counted Lee as its top shareholder, and merged with Samsung C&T, a de facto holding firm, Yonhap news agency said.
Samsung requested an outside review of the investigation to weigh the validity of the indictment and the Seoul Central District Prosecutors’ Office is following the necessary procedures, it said in a statement.
Last month, prosecutors questioned Lee, 51, over the latest investigation. He also apologized for a series of controversies around his succession planning.
Lee’s year in detention followed separate charges that he bribed Park to win government support for the 2015 merger which helped tighten his control of South Korea’s top conglomerate.