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The EU’s highest court has ruled that Fiat Chrysler will not pay taxes of thirty million euros to Luxembourg, as it will affect the commission’s efforts to crack down on corporate tax planning.
The case began in 2015 when the commission ruled that Luxembourg had granted Fiat a “selective tax advantage”. Competition commissioner Margrethe Vestager said in a statement: “Tax decisions that reduce the company’s tax burden are inconsistent with EU state aid rules. They are legal.”
In 2019, the general court accepted that the unpaid tax was state aid, but on Tuesday the European Court of Justice issued a dissenting opinion and said that previous decisions were “wrong”.
Once the decision is final, it cannot be appealed. Vestager said in a tweet that the defeat was “a huge loss for tax fairness”. He later said the commission would “carefully investigate the lawsuit and its implications”.
“Although the commission’s decision was overturned, the judgment provides important guidance for the application of EU state aid rules on taxation,” he added.
EU efforts to crack down on aggressive corporate tax plans have struggled in the courts. In 2020, judges rejected the European Commission’s order that Apple pay 14.3 billion in taxes to Ireland.
The commission also lost a tax case against Amazon. Both companies won challenges to pay the tax in the lower court but the commission is appealing the rulings. A final judgment will take place next year.
Separately, judges in Luxembourg struck down an EU order for Starbucks to pay 30 million euros in back taxes to the Netherlands, without Brussels appealing. In 2019, the Supreme Court overturned an EU decision on a 700 million euro Belgian tax scheme.
Investigations into tax rebates given to Ikea and Nike in the Netherlands are open. Huhtamaki’s tax treatment with Luxembourg is also being investigated.
Tuesday’s decision will make officials “more cautious” about tax investigations, said Assimakis Komninos, a partner at the law firm White & Case.
“This has always been a controversial area, where everyone knew from the beginning that proving government aid is difficult,” he added.
Plans for global legislation on low corporate tax rates have been discussed for years but have yet to come to fruition. A top European policymaker warned on Tuesday that if there is no agreement on a fair tax rate for the world’s biggest companies to do business, the EU will raise talks to introduce a tax on digital companies.
Several member states have reported that Brussels loses more than 35 billion euros a year from the corporate tax freeze.
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