AMSTERDAM, Netherlands – A tax deal the Netherlands agreed with Starbucks may be illegal the EU has said, with regulators on Friday confirming they were investigating.
The move is part of a crackdown on EU members attracting investment by helping companies to avoid tax.
Luxembourg, Ireland, Malta, Belgium, Cyprus and Gibraltar are also facing scrutiny from regulators over tax deals they have struck with various multinational companies.
The inquiries have intensified calls among lawmakers and EU countries for a more harmonised tax system in the 28-country bloc.
The European Commission, the executive branch of the EU, said it suspects the Dutch tax ruling allows Starbucks, the world’s biggest coffee chain, to lower its taxable profit, and thereby its tax bill, in a way that gives it an unfair market advantage.
“The Commission’s preliminary view is that the advanced pricing arrangements in favour of Starbucks constitutes state aid,” the EU executive said.
Dutch Deputy Finance Minister Eric Wiebes has hit back saying that the Starbucks deal “is fully in line with international transfer pricing standards and is consistent with the policy framework applied by the government in its efforts to create an attractive business climate”.
Starbucks said it was confident EU regulators would conclude in their investigation that it had not received a selective advantage.
The Commission says the Dutch tax authority had allowed a Starbucks subsidiary called Starbucks Manufacturing EMEA BV to declare a taxable profit equal to a percentage of its costs, while also allowing the company to exclude most of its costs when making the calculation.
This was partly achieved by excluding the cost of coffee beans, but the Dutch government says this is justified as the beans remained the property of another Starbucks subsidiary.
If the EU investigation finds Starbucks did receive an unfair advantage, the company could be forced to repay unpaid tax but the amounts are unlikely to be significant.
The EU inquiry into the Dutch deal with Starbucks is one of four ongoing in the region, with Fiat, Apple and Amazon also being investigated for so-called sweetheart deals with various other EU members states.