We now have the outcome of the EU Commissions investigation into the conduct of the Dutch and Luxembourgish tax authorities, in relation to the tax affairs of Starbucks and FIAT. Holland and Luxembourg must recover additional tax from the two companies concerned.

It’s routine for the Commission to challenge a piece of law which might confer selective advantage to a particular industry or sector. This decision issued on 21 October last marks a new departure; an investigation not into the law itself but into how that law is administered by the Member State authorities. The Commission had announced in June 2014 that was to investigate transfer pricing arrangements on corporate taxation of Apple in Ireland, Starbucks in the Netherlands and FIAT Finance and Trade in Luxembourg. At the time of writing, the decision on Ireland is still pending.

The Commission has several remedies available where it finds that any EU member state was providing selective aid to a company. Here it has chosen the harshest sanction, requiring Holland and Luxembourg to recover additional tax from the two companies concerned. The big question for Ireland now is why the Apple decision was not handed down at the same time, given that the three investigations were launched on the same day.

Not only was the decision harsh, but even the language of the Commission decision is combative. It suggests that the Dutch and Luxembourg tax authorities endorsed artificial methods which did not reflect economic reality. Initial signals from both governments concerned are reported to reflect disagreement and surprise.

Another point of concern is the length of time it took for the Commission to reach its decisions. In a State Aid case such as this, the Commission has very extensive powers to make enquiries from the Member States, the relevant authorities, and the taxpayers themselves. It is a fact finding and determination process rather than an investigation in the generally understood sense. In that context it is surprising that the investigation took 18 months, and that the findings in relation to all three investigations were not published together.

Following this ruling no company, whether headquartered inside or outside Europe, can be sure that any arrangement it might have with its local revenue authority is immune from scrutiny from the Commission. Perhaps that’s good competition policy, but tax policy fails if it cannot offer certainty to taxpayers.