European commissioner for competition Margrethe Vestager holds a press conference in Brussels yesterday. Vestager said tax deals that the Netherlands offered US coffee giant Starbucks and that Luxembourg gave Italian automaker Fiat were illegal.

AFP
Brussels

The European Union ordered Starbucks and Fiat yesterday to each repay up to €30mn in back taxes in a landmark tax avoidance case that began in the wake of the LuxLeaks scandal.
Brussels said tax deals that the Netherlands offered US coffee giant Starbucks and that Luxembourg gave Italian automaker Fiat were illegal, as it unleashed its first major blow in a campaign against sweetheart tax arrangements.
The Netherlands and Luxembourg both said they disagreed with the European Commission ruling that they would have to reclaim the tax from the two companies.
Decisions on Apple and Amazon are also looming after the EU launched a series of probes last year following the LuxLeaks affair, which revealed that top global companies had negotiated lower tax rates, in some cases just 1%, in secret pacts with Luxembourg.
“Tax rulings that artificially reduce a company’s tax burden are not in line with EU state aid rules — they are illegal. All companies, big or small, multinational or not, should pay their fair share of tax,” EU Competition Commissioner Margrethe Vestager said.
The LuxLeaks revelations were a huge embarrassment to Jean-Claude Juncker, who took over as European Commission President last November after serving nearly 19 years as Luxembourg prime minister during the period when the tax deals were made.
Tax rulings, as the deals are known, are not in themselves illegal and the companies involved insist they fully comply with the tax laws where they operate.
But the commission, the powerful executive arm of the 28-nation EU, enforces tough rules on state aid that are designed to ensure fair competition.
 It argues that the rulings unfairly advantage bigger companies at the expense of smaller and often less influential rivals.
Vestager — the former Danish economy minister who has has taken a tough line since assuming office as part of Juncker’s Commission last year — warned that the Fiat and Starbucks cases were not the end.
“I hope it is a clear message that these are the first two cases taken in this mandate but we have ongoing investigations and there may be more investigations to come,” she said.
Luxembourg rejected the decision and warned it would explore all legal options.
“Luxembourg disagrees with the conclusions reached by the European Commission in the Fiat Finance and Trade case and reserves all its rights,” a statement by Luxembourg’s finance minister Pierre Gramegna said.
An official in Luxembourg who wished to remain anonymous told AFP that this could include bringing the case to the European Court of Justice, the EU’s highest court.
The Netherlands said it was “surprised” and would inform parliament in coming weeks on the steps it planned to take.
“The method employed by the Netherlands when it comes to the Starbucks case has been internationally recognised,” Dutch Deputy Finance Minister Eric Wiebes said.
Starbucks in a statement said it stood by the Dutch government’s reaction, adding that it would seek to appeal the decision.
Eva Joly, a Green MEP and longtime critic of tax rulings, warned that Luxembourg and the Netherlands were hardly alone in abusing the practice.
“The commission has only addressed the tip of the iceberg,” Joly said.
US tech giant Apple and Internet retailer Amazon are still awaiting the EU’s judgment on their tax deals with Ireland and Luxembourg respectively.
Vestager already taken on big Corps including Russia’s Gazprom and is involved in a bitter anti-trust fight with Google, which the EU accuses of abusing its dominant market position to promote its own services.
But Apple and Amazon would come at a delicate time for EU-US business ties and as Brussels and Washington negotiate a huge free trade pact amid deep suspicions in Europe that Brussels may give too much away to get an agreement.
It would follow hard on the heels of a decision by the EU’s top court to reject a transatlantic personal data pact that risks punishing Silicon Valley companies operating in Europe.