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The European Commission will launch a formal investigation into Apple, Starbucks and Fiat in relation to tax arrangements with three EU countries.

The companies’ respective arrangements with Ireland, the Netherlands and Luxembourg will be investigated.

Announcing the move, tax commissioner Algirdas Semeta said that “fair tax competition is essential”.

Last year, a US Senate investigation accused Ireland of giving special tax treatment to Apple.

The European Commission will look at whether the companies’ tax affairs breach EU rules on state aid.

Competition Commissioner Joaquin Almunia said: “In the current context of tight public budgets, it is particularly important that large multinationals pay their fair share of taxes.”

Countries in Europe cannot allow certain firms to pay less tax than they should, Joaquin Almunia added.

The European Commission will launch a formal investigation into Apple in relation to tax arrangements with three EU countries

The European Commission will launch a formal investigation into Apple in relation to tax arrangements with three EU countries (photo AFP)

The investigations will focus on “transfer pricing”, or whether the countries allowed the multinational companies to charge one part of the company over the odds for goods or services from another part of the company as a way of shifting profits.

Under Commission rules, companies must charge their subsidiaries market rates.

Sanctions for a breach of tax rules could include an attempt to claw money back from Apple, Starbucks and Fiat.

Apple said that it had not had “any special tax deal with the Irish government”.

“We have received no selective treatment from Irish officials,” the company said.

“Apple is subject to the same tax laws as scores of other international companies doing business in Ireland.”

The Irish finance ministry said Apple “did not receive selective treatment and there was no <<special tax rate deal>>”.

“Ireland is confident that there is no state aid rule breach in this case and we will defend all aspects vigorously,” the Department of Finance said.

Last year’s US Senate committee investigation revealed that Apple had been able to funnel profits into Irish subsidiaries or “ghost companies” that had no declared tax residency anywhere in the world, cutting billions from its tax bill.

The Senate committee hearing revealed that Apple designated its Irish entities as unlimited companies, which meant it did not have to publish annual accounts.

The Irish arrangement allowed Apple to pay just 1.9% tax on its $37 billion in overseas profits in 2012, despite the fact the average tax rate in the OECD countries that make up its main markets was 24% last year.

In a 40-page memorandum, the Senate committee said: “Ireland has essentially functioned as a tax haven for Apple.”

Coffee giant Starbucks has been embroiled in a tax controversy for a number of years.

In 2012, the multinational admitted that it had a special tax deal with the Dutch government which allowed it to transfer money to its Dutch sister company in royalty payments.

Starbucks said on Wednesday that its Dutch tax arrangements conformed with financial law.

“We comply with all relevant tax rules, laws and OECD guidelines and we’re studying the Commission’s announcement related to the state aid investigation in the Netherlands,” a Starbucks spokesperson said.

The Dutch finance ministry said it was confident that its tax system was “robust”.

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Fiat shares have jumped more than 15 percent following the announcement of its plan to buy the remaining 41% of Chrysler it does not own.

The Italian car maker has owned a majority stake in Chrysler since 2009.

The new agreement ends long negotiations with the current owners, Veba, the healthcare trust affiliated to the United Auto Workers’ union (UAW).

Fiat has owned a majority stake in Chrysler since 2009

Fiat has owned a majority stake in Chrysler since 2009

The move will create the world’s seventh-largest car company.

Chrysler and Fiat will pay the trust an initial $3.65 billion.

Once the deal is signed off, Chrysler will pay Fiat another $700 million.

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Fiat has agreed to buy the remaining 41% of Chrysler it does not own in a move that will create the world’s seventh-largest car company.

The Italian motors giant has owned a majority stake in the US company since 2009.

The agreement ends drawn-out negotiations with the current owners, Veba, the healthcare trust affiliated to the United Auto Workers’ union.

Chrysler and Fiat will pay the trust an initial $3.65 billion.

Once the deal is signed off, Chrysler will pay Fiat another $700 million.

Fiat has owned a majority stake in Chrysler since 2009

Fiat has owned a majority stake in Chrysler since 2009

Fiat’s chief executive, Sergio Marchionne, plans to widen the company’s global reach.

The Veba trust looks after medical benefits for retired Chrysler workers.

The alliance between the two companies came amid the major restructuring of the US car industry following the financial crisis of the late 2000s.

The link-up gave Fiat access to the vast US car market, while Chrysler was able to benefit from the Italian firm’s expertise in developing small, fuel efficient vehicles.

Recently, Chrysler reported a 22% rise in third-quarter profits to $464 million, with net revenue up 13.5% to $17.6 billion.

Chrysler said its results had been helped by strong sales of its Jeep Grand Cherokee and the Ram 1500 pickup.

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Fiat and Mazda have decided to form an alliance to develop two-seater sports cars.

The alliance will work on a car for Fiat’s Alfa Romeo brand and a roadster with a different engine and styling for Mazda.

The cars will be built at Mazda’s plant in Hiroshima. Both will be based on a new version of Mazda’s MX 5 – the car that Mazda is best known for.

Mazda is looking to cut costs after losing $1.3 billion in its most recent financial year.

“Establishing technology and product development alliances is one of Mazda’s corporate objectives, and this announcement with Fiat is an important first step in that direction,” said Mazda President Takashi Yamanouchi in a statement.

Fiat and Mazda have decided to form an alliance to develop two-seater sports cars

Fiat and Mazda have decided to form an alliance to develop two-seater sports cars

Fiat chief executive Sergio Marchionne said working with Mazda would deliver “an exciting and stylish roadster in the Alfa Romeo tradition”.

Production of the Alfa Romeo model is planned to start in 2015.

Mazda had close ties with Ford and the US company owned nearly a third of Mazda in 1996.

But Ford has been winding-down that partnership over the last few years and now owns just 2% of the Japanese company.