European Union says Starbucks, FIAT profited from illegal tax breaks

"We continue the inquiries into tax rulings", Vestager said. The EU argues that by allowing Starbucks to calculate its profits this way, the Netherlands is giving the company, which until past year had its European headquarters in Amsterdam, an unfair state subsidy.

Starbucks struck a tax agreement with the Netherlands, whilst Fiat had a similar accord with Luxembourg.

The European Commission, the EU's executive arm, has launched a series of tax probes against top companies, including United States technology giants Apple and Amazon, and Wednesday's decision is a sign that European regulators are willing to take on the tax affairs of the world's most influential companies. "The Netherlands is convinced that actual worldwide standards are applied and shall, therefore, analyze the Commission's criticism carefully before taking a decision on further steps".

Corey duBrowa, a Starbucks spokesperson, said the company "shares the concerns expressed by the Netherlands government that there are significant errors in the (EU) decision, and we plan to appeal".

It concluded that the taxable profits for Fiat's Luxembourg unit could have been 20 times higher under normal market conditions.

"This is territory for the commission.it seems to us to be a serious matter for the commission to suggest that any Revenue authority might issue any ruling which does not reflect economic reality".

However, following the opprobrium of the Public Accounts Committee, senior MPs, the public and the tabloids, it made the first £5m instalment of a £20m corporation tax bill in June past year. The government in Luxembourg said it "does not consider that Fiat Finance and Trade has been granted incompatible state aid".

Fiat Chrysler was not immediately available for comment. "For competition authorities to challenge very technical tax rulings by competent authorities in this way is extremely destabilising".

Starbucks and Fiat will have to repay millions in "illegal" tax breaks following a state aid ruling against two European Union nations.

"I do hope that there is food for thought in companies in Europe and in tax authorities in Europe in these two decisions", she said yesterday.

"All businesses, large or small-scale, multinational or not, should pay their fair share of tax", she added. However, it can investigate whether certain advantageous fiscal regimes would be prohibited under its state aid rules, which are meant to prevent the distortion of competition when national governments grant advantages or incentives to particular companies. The Wall Street Journal points out that "hundreds, possibly thousands, of companies have used Luxembourg's holding-company rules to reduce their tax burden from the country's official 29% rate to nearly nothing".

"We do not stop here".