Brussels Upset over Netherlands’ Starbucks Tax Deal

Written by | Wednesday, November 19th, 2014

The Netherlands have been accused by the European Union of granting the café chain, Starbucks, unfair tax breaks. According to Brussels, the agreement is tantamount to an illegal subsidy provided by the Netherlands. Similar cases were rejected in the past and involved major international giants, such as Apple, Amazon, or Fiat. The complicated case of the mutual agreement between the government of the Netherlands and the management of Starbucks was presented to Amsterdam in June but it was made public last Friday (14 November). The case with Starbucks was revealed only a week after Luxembourg had allowed hundreds of other firms, such as Deutsche Bank, IKEA, or Pepsi – to enjoy similarly interesting tax agreements.

Jean-Claude Juncker, who was the Prime Minister of Luxembourg for 19 years, was criticized over the tax affairs with multi-nationals including some voices calling for his resignation. Mr Juncker however promised to fight tax evasion as the chief of the European Commission and vowed to stay out of the handling of the probes against Fiat and Amazon, leaving all the responsibility to EU Competition Commissioner, Margrethe Vestager.

The reasons for the formal opening of an investigation into the Dutch deal with Starbucks have been set out formally. The EU alleges that Starbucks secured an arrangement that allowed it to use a subsidiary based in the Netherlands to shift revenue from higher-tax economies to lower-tax ones. The investigations have also shed more light on royal payments made by that subsidiary to a UK-based legal entity that is believed to be unjustified and likely also channeling money to the U.S. headquarters of Starbucks. “In light of the foregoing considerations, the Commission’s preliminary view” is that the deal between Starbucks and the Dutch authorities “constitutes state aid” according to the EU treaty rules, the EU has officially commented.

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