News Coverage

After Starbucks, Fiat Penalties, Will EU Slam Apple?


The European Union's expected rulings that Starbucks (NASDAQ:SBUX) and Fiat Chrysler (NYSE:FCAU) got illegal tax breaks might be just the start of a crackdown, with bigger battles against Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) on the way.

The rulings, which could be handed down Wednesday, may be more about showing that the EU is serious about confronting tax evasion rather than extracting huge amounts of cash from the companies — but they are the "tip of the iceberg," sources told the Financial Times.

The EU is likely to say that a Starbucks manufacturing unit paid a 2.5% tax rate, as compared to the regular 25% Dutch rate, and that a Fiat Chrysler subsidiary paid a 1% rate vs. the regular 29% in Luxembourg, the FT said. Starbucks could have to pay up to $34 million, and Fiat Chrysler up to $227 million.

Apple and Amazon also have been subject to tax investigations in Europe, where companies for years have sought more friendly tax treatment. The investigations for the four companies began last year. The companies have denied wrongdoing.

Starbucks shares closed down 0.15% in the stock market today. Fiat Chrysler lost 3.2%. Apple climbed 1.8%, while Amazon fell 2.1%.
The rulings would likely further heighten anxiety for multinationals doing business in Europe, whose highest court recently struck down a data-transfer agreement in a direct hit to tech companies like Alphabet (NASDAQ:GOOGL) and Facebook (NASDAQ:FB).

But even with the tax rulings, the environment in Europe won't change overnight, said Lee Curthoys, who provides advice on international tax law at Radius, in an email.

"(T)raditional financial centers in Europe will not change their laws immediately and will continue to seek ways of attracting international businesses to their countries, while larger economies are also looking for ways of attracting businesses through lower tax rates (the UK's Corporation Tax rate is dropping to 18%) or through advantageous tax packages," he wrote.