State raid | The Economist

“The commission suggested that the two countries had connived in the two firms’ manipulation of transfer prices, the notional amounts for which different subsidiaries of the same firm sell goods or services to one another.

It claimed a Fiat finance unit in Luxembourg had provided loans to other divisions at artificially low prices, shrinking the unit’s revenue so that it paid a twentieth of the taxes it should have.

By the same token, the commission said that a Dutch subsidiary of Starbucks had overpaid a Swiss unit for coffee beans and a British one for “coffee-roasting know-how”.

A lengthy legal appeal is all but certain. In the meantime, the commission is conducting similar investigations into tax deals involving two tech giants, Amazon and Apple.

Whatever the outcome of all four cases, the commission’s stance will doubtless discourage other multinationals from resorting to such complicated arrangements to minimise their tax, to the delight of bigger countries dismayed by paltry corporate-tax receipts.

As one Dutch tax lawyer quips, “If [multinationals] have to choose, they’ll always pick avoiding court over avoiding taxes.” State raid | The Economist

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