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Luxembourg to appeal EU tax dodging fine on Fiat

Published on 04/12/2015

Luxembourg said on Friday it will appeal an EU ruling that Italian auto giant Fiat must pay around 30 million euros ($34 million) in back taxes after benefiting from an illegal tax break from the small Duchy.

“The Luxembourg government today has decided to appeal the European Commission’s decision in the Fiat case, in order to seek legal clarity and predictability on the practice of tax rulings,” the finance ministry said in a statement.

The European Union in October ordered Fiat as well as coffee maker Starbucks in the Netherlands to each repay up to 30 million euros in back taxes in a landmark tax avoidance case pursued in the wake of the LuxLeaks scandal.

The investigations, which also include Amazon and Apple in Ireland, widened further on Thursday with the EU’s decision to probe the tax deals between Luxembourg and the US fast food giant McDonald’s.

Luxembourg said that it was unfairly targeted by the European Commission in the Fiat case for a practice that was common in “vast majority” of EU members states.

It also said that the commission, the EU’s competition regulator, failed to prove that Fiat had benefited from illegal state aid through the tax break as defined by European law.

Tax deals between EU member states and companies — known as tax rulings — are not in themselves illegal and the firms involved insist they fully comply with tax laws.

But the Commission argues they run afoul of strict rules on state aid, which are designed to ensure fair competition for all across the EU.

All these cases came in the wake of the LuxLeaks affair, which revealed that top global companies had negotiated lower tax rates, in some cases as low as one percent, in secret pacts with Luxembourg.