Tax breaks for Apple Inc., Starbucks Corp. and Fiat Finance& Trade SA in three European Union countries are underinvestigation by EU competition regulators in a clampdown onspecial treatment for companies.

The EU is checking whether the tax deals in Ireland, theNetherlands and Luxembourg are illegal state aid, according to ane-mailed statement today. Governments can be ordered by theEuropean Commission to claw back unfair aid.

The EU inquiry comes amid a global crackdown on tax avoidance asgovernments struggle to increase revenue and reduce deficits.Lawmakers in the U.S., the U.K., France and Italy have scrutinizedcompanies such as Microsoft Corp., Hewlett-Packard Co., GoogleInc., and Amazon.com Inc. The commission has said tax avoidance andevasion in the EU cost about 1 trillion euros ($1.4 trillion) ayear.

“Special secret deals should be outlawed across the EU,” ChasRoy-Chowdhury, head of taxation at the Association of CharteredCertified Accountants, said in an e-mailed statement. “All taxbreaks and reliefs should be openly available for qualifyingbusinesses.”

The EU began gathering information about accords between Appleand Ireland, Starbucks and the Netherlands and Fiat Finance &Trade in Luxembourg last year following reports that some companiesreceived “significant” tax reductions.

“We need to fight against aggressive tax planning,” JoaquinAlmunia, the EU's competition commissioner, said at a pressconference in Brussels. He said it's “still too soon to anticipate”possible recovery if the EU finds the tax rulings to beillegal.

The commission said today it's concerned that currentarrangements could underestimate the taxable profit and grant anadvantage to the respective companies by allowing them to pay lesstax.

“Apple pays every euro of every tax that we owe,” the companysaid in an e-mailed statement. “We have received no selectivetreatment from Irish officials. Apple is subject to the same taxlaws as scores of other international companies doing business inIreland.”

Ireland's Finance Ministry said it's “confident that there is nostate-aid-rule breach” and will “defend all aspects vigorously.”The EU probe targets “a very technical tax issue in a specificcase” and covers 2004 to 2014, it said in an e-mailedstatement.

U.S. Report

Apple's Irish tax arrangements drew scrutiny in the U.S. lastyear. The company negotiated a tax rate of less than 2 percent withIrish authorities, a U.S. senate report said in May 2013, citingthe iPhone and iPad maker.

According to that report, Apple told the investigation that theIrish government had calculated the company's taxable income toproduce an “effective rate in the low-single digits.”

The commission said it also stepped up legal action againstLuxembourg over its refusal to supply all the information itrequested. The nation is separately suing the EU for seeking “veryextensive information” on taxation of intellectual propertyrights.

The Luxembourg Finance Ministry didn't immediately respond toe-mails seeking comment.

Fiat Finance and Trade, which handles automaker Fiat SpA's cashmanagement and treasury activities, said it was “surprised” by theEU announcement.

The company said it “has no reason to believe that any favorabletreatment was contemplated by the tax authorities of Luxembourg inissuing such tax ruling, because in fact no such treatment was everreceived.”

The Dutch Finance Ministry said it will cooperate with the EUand is confident that the probe will show that no state aid wasgranted.

Starbucks complies with “all relevant tax rules” as well as lawsand international guidelines set by the Organization for EconomicCooperation and Development, Simon Redfern, a spokesman for thecompany, said by e-mail.

The commission said it will continue a wider inquiry, includinginformation gathering from the U.K., Belgium, Cyprus and Malta ontax rulings, Antoine Colombani, Almunia's spokesman, said bye-mail.

None of the EU investigations relate to companies in the U.K. orthe tax treatment they have received under the country's rules,said a British official who wasn't allowed to be cited by name, inline with government policy.

In the U.K. the tax rules apply equally to all firms and nopreferential tax rulings are offered to companies, the officialsaid.

Patent Boxes

The EU has also sought details from Belgium, Spain, France,Hungary, Luxembourg, the Netherlands, the U.K., Cyprus and Malta onso-called patent boxes, which allow tax reductions on income frompatents, he said.

The regulator said in March it has indications that the programsmainly benefit highly mobile businesses without triggeringsignificant additional research and development.

The U.K. patent box phases in a lower corporation tax on someprofits from patented inventions and certain other innovations,according to tax authority's website.

It was was one of the reasons that GlaxoSmithKline Plc cited in2012 for its plans to invest about 350 million pounds ($588million) in a new drug-ingredient plant in the U.K.

“We do not believe that this measure gives rise to any state aidor other EU law issues, as it is open to all companies with tradingincome from patents or related intellectual property, regardless ofsector,” a U.K. government spokesman said.

Tax policy is one of the most sensitive political issues in the28-nation bloc. Changes to EU tax rules require unanimous approvalamong governments, rendering major changes almost impossible. Eventhe most enthusiastic members of the EU have clung to their rightto set corporate rates.

Luxembourg, led until last year by European Commission-presidentcandidate Jean-Claude Juncker, has won a reputation as anattractive location for multinational companies.

Luxembourg has “a very favorable tax ruling policy,” HowardLiebman, a tax partner at law firm Jones Day in Brussels, said in aphone interview. “And this is a policy that is very individualized.It is not written into the law; it is not written into regulations,so it's hard to prove exactly what they're doing.”

“In other words, it's hard for the commission to actuallycondemn it,” Liebman said.

The opening of an in-depth investigation by the commissionallows third parties, as well as the three countries concerned, anopportunity to submit comments.

Bloomberg News

Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.