EU demands Starbucks, Fiat pay back millions

BRUSSELS — The European Union is demanding that U.S. coffee chain Starbucks and carmaker Fiat repay up to 30 million euros ($34 million) each in tax breaks they received from EU nations, in a major ruling to cut down on sweet tax deals multinationals often shop for.

Because multinationals in the EU pay their taxes in the country where they have their regional headquarters, countries have long competed among themselves to lure the companies.

That has resulted in countries offering tax advantages that allow the companies to pay very low tax overall and has become a big political issue as citizens in many European nations are forced to tighten their belt while some multinationals get away with huge tax breaks.

The EU’s executive branch, the Commission, has been tightening the loopholes in EU law that allow for such deals. On Wednesday, it said that agreements Starbucks struck with the Netherlands and Fiat with Luxembourg years ago were not fair.

“All companies, big or small, multinational or not, should pay their fair share of tax,” said EU antitrust Commissioner Margrethe Vestager as she announced the ruling Wednesday.

She stressed the companies are not “the poster children of bad taxing behavior.”

Starbucks said in an immediate reaction that it plans “to appeal since we followed the Dutch and OECD rules,” referring to the Organisation for Economic Co-operation and Development, a watchdog for developed economies.

Fiat Chrysler also denied receiving any state aid from Luxembourg for its financing branch. It said a deal it reached with Luxembourg was aimed only at clarifying pricing rules and “did not result in any state aid.”