The European Commission recently charged Starbucks Corp. and Fiat Chrysler Automobiles NV with illegal tax deals in the Netherlands and Luxembourg. Starbucks is ordered with paying 20-30 million euros (a drop in their bucket) in back taxes to the Netherlands, and Fiat must pay a similar amount in Luxembourg. Both companies plan to appeal this, claiming that proper investigation was not done properly, with significant errors, and they deny any illegal activity. They are not the only multinational corporations that have moved to the EU for tax breaks and may not be complying with the rules. Apple in Ireland has also received many tax breaks and an investigation will be happening there too.
EU is attempting to crack down as much as possible on the large corporations that are taking advantage of tax loopholes. The only way they will be able to enforce the rules more and prevent this from happening is by creating more legislation defining what is allowed and by actually enforcing it. They do not want the larger companies that are more powerful to have a greater advantage than the smaller and medium sized countries that don't get the same breaks. This investigation is setting off an alarm for other similar multinational corporations looking to do business abroad.
http://www.reuters.com/article/2015/10/21/eu-taxavoidance-idUSL8N12L1ZH20151021
3 comments:
It is amazing how many loopholes there are regarding taxes and many companies are saving through these loopholes. Even though 20-30 million euros is not a lot for a company like Starbucks, imagine how much money the government isn't receiving from all the companies taking advantage of the loopholes: it must add up! I wonder what type of legislation the EU is considering and how effective it will be. It seems like there is always a way to cheat the system and big corporations always seem to find them.
This is one of the reasons why globalization started. Companies want to take advantage of these tax loopholes, so they can retain more money. Even if these companies exploit the government, they are not that concerned if they are keeping more money. One thing that we are not considering is that Starbucks is appealing these charges. The results of the appeal will not be shown for a couple of months, so these charges might not hold.
The loopholes that these businesses find and capitalize on are extremely beneficial for them and it seems like it has been long overdue for governments to intervene and put an end to it. What is concerning is how businesses exploit the government by receiving tax breaks by operating in certain geographical areas or remaining in their home countries. This is where lost revenue really adds up in the grand scheme of things and governments should really be focusing on correcting this.
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