Apple, Starbucks and Fiat beware: the EU is investigating tax arrangements

The European Commission is looking into whether the companies are getting 'favourable treatment' from Ireland, The Netherlands and Luxembourg.

by Rachel Savage
Last Updated: 29 Sep 2014

Some scandals just keep on running and corporate tax arrangements is one of those. Apple, Starbucks and Fiat are now being formally investigated by the EU over whether they’re getting tax deals that fall foul of competition rules, from Ireland, The Netherlands and Luxembourg respectively.

The European Commission is looking into whether the companies received ‘favourable treatment’ from the governments. However, Apple bit right back, saying it did not have ‘any special tax deal with the Irish government’.

The tech giant came under scrutiny from a US Senate committee investigation last year, which revealed it had cut billions from its tax bill by registering companies in the Irish city of Cork and declaring that they weren’t tax resident in any country. That meant its effective tax rate on non-US income was just 3.7% (the UK’s corporation tax rate is 21%).

Starbucks has also been skewered by politicians and popular opinion in the UK and Europe more widely for its relatively low tax bill. It is even moving its headquarters from Amsterdam to London in a bid to placate the populace.

The important point is that what these companies are doing is quite probably entirely legal (unless they have indeed got special arrangements with EU governments) and therefore reasonable. If politicians want them to pay more tax they need to club together across borders and close loopholes. Given the incentives for countries to undercut one another to attract investment that’s unlikely to happen any time soon.

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Government

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