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E.U. prepares to smite Starbucks; Apple, Amazon next in line

Margrethe Vestager, the European Union?s commissioner for competition, in Washington, April 16, 2015.Margrethe Vestager, the European Union?s commissioner for competition, in Washington, April 16, 2015.
Competition Commissioner Margarete Vestager is close to finishing her probe of multinational tax practises.T.J. kirkpatrick—Redux

The European Union is preparing to order Starbucks and Fiat Chrysler to repay “tens of millions of euros” in taxes to the countries that lured them to set up business there with illegal sweetheart deals, according to The Financial Times.

The FT reported Tuesday that Competition Commissioner Margarete Vestager is set to rule that countries such as Ireland, the Netherlands and Luxembourg offered illegal state aid to companies by offering them exceptionally low tax rates as an incentive to base their European operations there. The practise, which has been rife among multinational companies in recent decades, has eroded the tax bases of larger countries such as France, Germany and the U.K., as companies have booked profits in those countries where the tax burden is lowest.

All the countries and companies involved in the investigation argue that the schemes were legal under current E.U. law, which leaves tax matters in the power of member states.

The ruling on Starbucks Corp. (SBUX) and Fiat Chrysler Automobiles Inc. (FCAU) is likely to be only an appetizer before the main course: the Commission still has investigations pending into Apple Inc.’s (AAPL) tax deal with Ireland and Amazon.com Inc’s (AMZN) deal with Luxembourg.

The FT cites people close to the cases as saying that the fines are likely to fall well short of the maximum that could theoretically be levied. Starbucks’ liability is estimated at less than €30 million ($34 million), while FCA’s is put at “not more than €200 million.”