Fiat v Commission: A Misconception at the Heart of the Tax Ruling Cases

Abstract

In October 2015, a ripple was sent through the tax world when the European Commission found that Luxembourg and the Netherlands had provided unlawful State aid to Fiat and Starbucks. At the core of the Commission's decisions was the assertion that the Member States had misapplied the ‘arm's length principle’ ‐ a principle which broadly seeks to ensure that transactions between associated enterprises are priced as if carried out by independent parties Both were appealed. The first decisions of the General Court were handed down in October 2019 and were a mixed bag for the Commission – a win in the Fiat decision, but not Starbucks. The judgment in the subsequent Fiat appeal was handed down in November 2022. This was the first opportunity the Court of Justice had to consider the Commission's central argument that Member States were bound to apply a general ‘arm's length principle’. This case note analyses the judgment and considers its ramifications for other Member States, for multinationals, and for the capacity of EU law to tackle harmful tax competition.