LUXEMBOURG (CN) — The European Union’s top court threw out a $30 million tax penalty against Fiat Chrysler on Tuesday, finding Brussels overstepped its authority.
The European Court of Justice held that it was for Luxembourg, where the Italian-American automaker's finance unit was headquartered, to decide its tax regime, not the European Commission. The decision is the latest in a series of losses for the EU's executive branch over anticompetitive practices.
In 2015, the European Commission ordered Fiat Chrysler to pay 30 million euros ($30 million) in back taxes to Luxembourg after finding a beneficial tax arrangement amounted to illegal state aid. At the time, Brussels was looking into so-called sweetheart tax deals some countries – including Luxembourg, the Netherlands and Ireland – had offered big international companies to set up shop within their borders.
Fiat Chrysler, which merged with France's Peugeot to form Stellantis last year, and Luxembourg contested the decision jointly but lost before the EU’s second-highest court, the General Court, in 2019. The court found the automaker had artificially reduced its tax burden using a scheme approved by the tiny landlocked country in 2012.
On appeal, the EU’s highest court found Tuesday it was for Luxembourg to determine which tax scheme was applicable, not Brussels.
“Only the national law applicable in the Member State concerned must be taken into account in order to identify the reference system for direct taxation,” the 17-judge panel wrote.
Late last year, an adviser to the Court of Justice came to a similar conclusion. Advocate General Priit Pikamäe held in his nonbinding opinion for the court that tax rates are the responsibility of national governments, not the EU.
In a statement posted on Twitter, the EU's competition commissioner Margrethe Vestager said the ruling was “a big loss for tax fairness.”
The Court of Justice has been mostly critical of Vestager’s approach. 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 General Court also sided with Luxembourg over an arrangement with Amazon, which the commission is appealing.
Brussels is also appealing a lower court decision in January that nixed a $1.2 billion antitrust fine against Intel. A 997 million euro ($1.1 billion) fine against San Diego-based Qualcomm for similar anticompetitive behavior is still pending before the court.
Last month, the governments of the EU’s five largest economies agreed to implement a 15% global minimum corporate tax by next year if their plan moved forward.
“We stand ready to implement the global minimum effective taxation in 2023 and by any possible legal means,” France, Germany, Italy, Spain and the Netherlands said in a statement.Follow @mollyquell
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