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Feb. 15 — Luxembourg, the Netherlands and a Fiat Chrysler Automobiles NV unit want a European Union court to quash decisions by the bloc's executive body that the Italian carmaker and Starbucks Corp. benefited from their tax deals, saying the European Commission was wrong to find that the agreements were illegal state aid.
In the first challenges to reach the EU courts since the commission's October decisions, the two governments and Fiat argue in separate appeals that the regulator failed to prove how the accords gave any advantages to the companies.
“The contested decision breaches the principle of legal certainty since the commission's novel formulation of the arm's length principle introduces complete uncertainty and confusion as to when an advance pricing agreement, and indeed any transfer pricing analysis, might breach EU state aid rules,” Fiat said in a summary of its claims, which was published Feb. 15 along with those of Luxembourg and the Netherlands.
Luxembourg's fiscal deals with international companies came into the open in 2014, when hundreds of documents were leaked. They showed that more than 340 companies, including PepsiCo Inc., Ikea Group and FedEx Corp., transferred profits to the country through tax arrangements. The arm's-length principle is meant to ensure that, for tax purposes, transactions between subsidiaries are based on prices an unrelated company would pay.
The spotlight turned on Ikea over recent days after a report commissioned by the EU's Green Party said the Swedish furniture chain used tax breaks to avoid paying at least 1 billion euros ($1.1 billion) during the past six years.
Ikea said it pays “taxes in full compliance with national and international tax rules and regulations,” according to an e-mailed statement Feb. 15. In fiscal year 2015, “Ikea Group paid around 822 million euros in corporate income tax globally, which equals an effective corporate income tax rate of just below 20 percent.”
The Brussels-based commission, which guards against illegal state aid, said it will study the Greens' report in detail.
The watchdog is pushing forward with probes into Apple Inc. and Amazon.com Inc. for tax deals they set up in Ireland and Luxembourg, respectively. In January, the commission announced its third decision so far, saying Belgium's tax arrangements with about 35 companies, including Anheuser-Busch InBev SA, were illegal.
The EU wants to make it harder for companies to exploit differences in national laws or to park profits in a low-tax jurisdiction instead of paying taxes in the locales where the revenue is generated. The regulator on Jan. 28 proposed a broad package of measures to crack down on tax dodgers, including an obligation for companies to share their country-by-country bills with tax authorities.
With assistance from Aoife White.
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