By Steven Johnson
Oct 22, 2015
Thanks to a new ruling from the European Commission, Starbucks and Fiat are now finally being forced to pay their fair share of taxes, as tax loopholes benefiting multinational corporations with accounts in European countries known for their tax haven status have been ruled illegal.
After 5 years of direct action and organizing from the grassroots, anti-austerity movement UK Uncut, which ties corporate tax avoidance to public service cuts, the movement can claim another major victory — particularly in regards to Starbucks, as UK Uncut has targeted the company for years due to its reputation as a notorious corporate tax avoider.
On Wednesday, the commission ruled that that those companies must now pay back the $34 million USD they each avoided thanks to tax loopholes in Luxembourg and the Netherlands. And from the looks of it, more retribution is in the cards.
“The Commission continues to pursue its inquiry into tax rulings practices in all EU Member States,” the commission statement read. “Its existing formal investigations into tax rulings in Belgium, Ireland and Luxembourg are ongoing.”
For years, multinational corporations have been finding and exploiting tax loopholes in order to dodge paying the full amount of taxes owed, and in most cases they were able to successfully dodge paying any taxes altogether. Much of this process involves utilizing European tax laws to book profits made in the US in overseas bank accounts. The statement issued by the commission explained the process by which these two companies were able to exploit tax laws:
The two tax rulings under investigation endorsed artificial and complex methods to establish taxable profits for the companies. They do not reflect economic reality. This is done, in particular, by setting prices for goods and services sold between companies of the Fiat and Starbucks groups (so-called “transfer prices”) that do not correspond to market conditions. As a result, most of the profits of Starbucks’ coffee roasting company are shifted abroad, where they are also not taxed, and Fiat’s financing company only paid taxes on underestimated profits.
“Tax rulings that artificially reduce a company’s tax burden are not in line with EU state aid rules. They are illegal,” said Margrethe Vestager, the EU Competition Commissioner. She went on to say that today’s decision should send a message to both member state governments and companies alike that all companies big or small, multinational or not, should pay their fair share in taxes.
While the investigation into corporate exploitation of tax loopholes is limited to Europe for now, it may soon impact the tax avoidance habits of major American corporations. The Commission’s statement mentioned ongoing investigations into Apple’s habit of booking profits made from American economic activity in Ireland — a known tax haven — as well as Amazon’s use of Luxembourg’s tax laws to avoid paying taxes on revenue made in the United States.
Steven Johnson is a Georgia-based journalist for US Uncut. He can be reached via email at firstname.lastname@example.org.