European Commission Ruling on Starbucks Corporation (SBUX), Fiat Chrysler Automobiles (FCAU) Tax Deals Challenged

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The governments of Luxembourg and Netherlands challenged the ruling of the European Commission that Starbucks Corporation (NASDAQ:SBUX) and Fiat Chrysler Automobiles NV (NYSE:FCAU) benefited from their tax deals.

Luxembourg and Netherlands filed an appeal on the matter and asked a European Court to overturn the decision of the European Commission that the tax deals were illegal state aid.

A unit of the Fiat Chrysler Automobiles also filed a separate appeal challenging the European Commission’s ruling.

Argument against the European Commission

Luxembourg, Netherlands, and the Italian automaker argued that the regulator failed to prove that the tax deals were beneficial to the companies.

The Italian automaker argued, “The contested decision breaches the principle of legal certainty since the commission’s novel formulation of the arm’s length principle introduces complete uncertainty and confusion as to when an advance pricing agreement, and indeed any transfer pricing analysis, might breach EU state aid rules.”

The appeals against the European Commission’s ruling on Starbucks and Fiat Chrysler Automobiles’ tax deals were published on Monday.

The tax agreements of Luxembourg with international companies were revealed after the leak of hundreds of documents in 2014. The documents showed that 340 companies including PepsiCo (NYSE:PEP), FedEx Corporation (NYSE:FDX) and Ikea Group transferred profits to Luxembourg through tax agreements.

Ikea tax agreements on the spot light

According to Bloomberg, the tax agreements of Ikea Group were put on the spotlight over the weekend after the EU Green Party reported that the Swedish furniture retail chain operator avoided paying taxes worth around €1billion over the past six years by using loopholes.

In response to the report, Ikea said it is paying taxes in “full compliance with national and international tax rules and regulations.” The company added that it paid around €822 million in corporate income tax globally for the fiscal 2015. The company said its tax payment is equivalent to an effective corporate income tax rate of just below 20%.

The European Commission said it would review the Green Party’s report. The regulator is also moving forward with its investigation regarding the tax deals of (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) in Luxembourg and Ireland, respectively.

Last month, the European Commission announced its decision that Belgium’s tax deals with around 35 countries including Anheuser-Busch InBev (NYSE: BUD) were illegal.