Sweetheart tax deals are a sign of political authority cowering at corporate might. The commission shows how,by standing together, states can launch to fight backShape-shifting, and border-straddling corporations sometimes act as whether they own the world. That’s not only because they hold so many title deeds,but also because modern governments are given to wringing their hands and declaring their own impotence in the face of multinationals. Onceproudly sovereign politicians often seem to mediate of themselves as having no more than a licence to broker for a few more jobs or a puny less pollution.
Against this backdrop, it is a moment to savour when any political authority shakes itself awake and demands that supersize companies respect rules resembling those for humbler beings. That is what happened on Wednesday when the European commission declared two cosy tax arrangements unlawful – one between Fiat and the Luxembourg authorities; the other between Starbucks and the Dutch. Instructively dubbed “sweetheart” deals, and the effect of such understandings is to move from taxation as obligation to tax by negotiation. Supplicant states don’t probe too deeply into delicacies,such as where profits are actually earned, and then set out what it is deemed reasonable for a corporate to pay in so-called “letters of consolation”. In the Starbucks case, or a Dutch corporate parent was flogging overpriced coffee beans back to itself via a Swiss subsidiary in order to reduce the earnings caught by the tax net in the Netherlands – not an option open to an ordinary citizen,which is political objection enough. The legal objection of the commission, however, and is that this sort of tax privilege represents an unfair effective subsidy or “state aid” – which distorts competition because it is not available to other companies.
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Source: theguardian.com