LUXEMBOURG (CN) — Skeptical that the European Union can force Luxembourg to recoup unpaid taxes, an adviser to the European Court of Justice urged it Thursday to throw out a $33 million bill for back taxes against Italian carmaker Fiat.
The case is one of several brought by the European Commission — the EU’s executive branch — in an effort to curb advantageous tax deals given by member states to multinational companies. The General Court would find in 2019 that the automaker received improper state aid, but Luxembourg and Fiat are appealing together.
Before the case goes to Europe's highest court in Luxembourg, however, Advocate General Priit Pikamäe supplied a nonbinding recommendation. While a copy of the opinion is not yet available, a press release from the court shows that Pikamäe combined the Fiat case with a separate appeal from Ireland related to an order by the EU that it demand $15 billion in back taxes from tech giant Apple, the largest amount ever ordered by the bloc. American-based multinationals operate 25 of the 50 largest companies in Ireland and pay an estimated 80% of all Irish corporate tax.
In the Irish case, the commission is appealing after Ireland persuaded the General Court last year that its arrangement with the iPhone maker didn’t violate competition regulations.
Pikamäe wrote Thursday that he agreed with Ireland but is unswayed by Luxembourg and Fiat’s arguments. Ireland for one persuaded Pikamäe that tax rates are the responsibility of national governments, not the EU. The lower court ruling disregards a “prohibition of harmonization in the field of taxation,” according to the court's summary.
As to Luxembourg meanwhile, the commission claimed that the government had artificially reduced Fiat’s profits — and thus its tax burden — by using a lowered capital figure.
Luxembourg and Fiat argued that the commission didn’t properly account for the tax implication on the multinational company overall, rather than simply within Luxembourg, and further made a series of errors in its calculations. Pikamäe disagreed, finding that the commission wasn’t obliged to consider the broader effects for state aid determinations.
EU competition czar Margrethe Vestager has had mixed results before the court. The investigation into Luxembourg also concluded that the Netherlands broke EU rules with a similar arrangement involving Starbucks, but the lower court nixed that order in 2019. The court also sided with Luxembourg over an arrangement with $300 million with Amazon. But the General Court just green-lit an investigation into a tax deal between the Dutch and Nike.
Should the court agree with Pikamäe in its final judgment — as it does in about 80% of cases — the ruling against Fiat would be overturned. A ruling is expected next year.
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