European Union antitrust regulators have ruled that a deal between Starbucks and Dutch authorities could be illegal as the Netherlands is giving the coffee-shop giant unfair tax breaks.
Essentially it is an allegation that the current arrangement with Starbucks amounts to an illegal subsidy by the Netherlands.
The European Commission made the comments after its investigation into the case involving the company’s Starbucks Manufacturing EMEA BV.
The “sweetheart deal” deal is one of four that the Commission believes is giving certain companies an unfair advantage, the Commission has similar arguments against Ireland with Apple and Luxembourg with Amazon and Fiat.
According to a European Union executive:
“The Commission’s preliminary view is that the advanced pricing arrangements in favor of Starbucks Manufacturing EMEA BV constitutes state aid… The Commission has doubts about the compatibility of such aid with the internal market.”
The Commission said that Starbucks used a Netherlands subsidiary to move revenue from higher-tax countries to lower-taxed ones.
According to the Commission, Starbucks Coffee and Starbucks Manufacturing, paid €715,876 in taxes in 2011 and between €600,000 to €1m in 2012.
The statement by the European Commission instructed Dutch tax authorities to apply Organisation for Economic Cooperation and Development “standards to tax agreements with companies,” adding “the Starbucks case is no exception to this rule.”
Dutch finance minister Jeroen Dijsselbloem said during a visit to Brussels on Friday:
“The last thing the Netherlands wants is for companies to shop here and there until they pay no more at all on their profits. It’s not in our interest. It’s not in anyone’s interest.”
Update October 10, 2015: The finance ministers of the 20 major economies signed an agreement in Lima, Peru, to put into practice a proposal put forward by the OECD to close the loopholes so that multinationals won’t be able to avoid billions of dollars in corporate taxes.