By Tom Fairless
BRUSSELS--European Union regulators said Wednesday they have
opened formal investigations into the tax practices of Apple Inc.,
Starbucks Corp. and a Luxembourg-based division of Fiat SpA, as
part of a broader probe into whether multinational companies have
enjoyed sweeter tax deals than are permitted under EU law.
The European Commission, which acts as the region's central
antitrust authority, said it would examine whether generous tax
arrangements granted to global corporations in three EU
countries--Apple in Ireland, Fiat Finance and Trade in Luxembourg
and Starbucks in the Netherlands--amounted to illegal state
aid.
"In the current context of tight public budgets, it is
particularly important that large multinationals pay their fair
share of taxes," said EU antitrust chief Joaquín Almunia.
The commission has requested information from two other EU
countries--the U.K., in relation to Gibraltar, and Belgium--as part
of the same broad investigation, Mr. Almunia said.
At issue are so-called transfer-pricing arrangements, under
which companies can redistribute profit within a group by charging
for goods or services sold by one subsidiary to another, typically
located in different countries. Experts say transfer pricing can
help companies to minimize their tax bills.
Mr. Almunia said that such arrangements could violate EU rules
on state aid if certain companies are allowed to engage in transfer
pricing that doesn't reflect market terms.
The commission is concerned that in the three cases under
investigation, tax deals that were blessed by national authorities
"could underestimate the taxable profit and thereby grant an
advantage to the respective companies," it said.
"We have serious doubts about these three decisions" by national
tax authorities, Mr. Almunia said. If the commission finds the
companies did indeed benefit from state aid, they could be asked to
pay it back, he said.
The commission has opened formal infringement proceedings--which
could ultimately lead to fines--against Luxembourg for not
responding fully to its requests for information on its tax regime,
Mr. Almunia added.
"We have received very, very small parts of the information we
need and requested," Mr. Almunia said. "The quality of the
information received is not the best one."
Ireland's government said it was confident that its tax
arrangements with Apple didn't breach EU rules. Ireland will defend
all aspects of the case vigorously, if necessary in the European
courts, a spokesperson said.
The Dutch government said it was confident that its tax
arrangements with Starbucks didn't breach EU laws. A spokesman for
Luxembourg declined to comment.
Apple denied that it had received selective treatment from Irish
officials, and said its taxes in Ireland had increased tenfold
since 2007. "Apple pays every euro of every tax that we owe," the
company said in a statement.
Fiat and Starbucks couldn't immediately be reached for
comment.
In a parallel investigation, the commission has also requested
information from nine EU countries relating to their use of patent
boxes, under which national authorities levy lower tax rates for
income from intellectual property, Mr. Almunia said.
The probes are part of a broader crackdown on tax evasion and
tax avoidance in Europe in the wake of the region's financial
crisis, as politicians aim to boost depleted national coffers and
soothe voter anger over cuts to welfare programs.
Write to Tom Fairless at tom.fairless@wsj.com
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