Starbucks and Fiat are required to pay back millions in taxes to Dutch and Luxembourg Government

By Money Times

Oct 22, 2015 04:41 AM EDT

The European Union Commission agreed that Starbucks Corp and Fiat Chrysler Automobiles NV are currently benefiting from illegal tax deals with the government. The decision came yesterday after the hearing organized by the European Parliament.

Based on the decision achieved, both companies are being required to pay back around 20 to 30 million euros to the Dutch and Luxembourg authorities, according to Reuters. The new ruling is expected to bring more big corporations into the limelight as currently there are plenty of companies operating under the same illegal tax deals.

Currently, corporations are using the Luxembourg's holding-company rules to reduce their tax fees. The reduction can be as low as 29 percent to almost 100 percent in tax deduction leaving the government with lesser return by allowing the corporations to do business in their country.

According to The Wall Street Journal, the investigations for the tax deals were first done on the Dutch and Luxembourg government, before it was revealed that the government is operating fairly, but the corporations are the one misusing the loophole in the tax system. The illegal tax operation was first uncovered by the International Consortium of Investigative Journalist in Washington.

Both governments have denied involvement in the tax issue and said that its tax deals did not violate any EU treaty law and was given two months to find out the exact amount of return tax needs to be reclaimed with both Starbucks and Fiat. Both corporations, on the other hand, are planning to appeal with the government to reinvestigate the case as there might be a miscalculation in their investigation.

Based on the reports, the investigation for these big corporations was done by the European Union Competition Commissioner. Among the members is Margrethe Vestagar who has been vocal in bringing in all the big corporations to promote fair business trade in the European countries.

The Telegraph quoted that Vestagar promise to crack more big corporations soon. According to Vestagar, "I hope that, with today's decisions, this message will be heard by member state governments and companies alike, remove the unfair competitive advantage [Stabucks and Fiat] have enjoyed and restore equal treatment. All companies, big or small, multinational or not, should pay their fair share of tax."  

The meeting was attended by many key regulators including European Commission President Jean-Claude Juncker and Economic and Financial Affair Commissioner Pierre Moscovici. The meeting was held specially to address the issue of big corporations' unfair trade taxes to enable them to dodge from paying higher taxes.

Currently, the commissioner is still investigating many other corporations and ruling on these companies can be expected soon. Among the companies that are suspected to be avoiding taxes are in Luxembourg, Apple in Ireland, and AB InBev in Belgium.

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