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EU criticizes Starbucks' Dutch tax deal

November 14, 2014

A tax deal between the Dutch government and Starbucks could be illegal, the European Union has said. The allegations come amid global uproar over corporations avoiding billions in taxes via so-called sweatheart deals.

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Starbucks in London
Image: picture alliance / Sven Simon

European Union regulators on Friday accused the Dutch government of striking an illegal tax deal with Starbucks, making public the details of an investigation that could see the US coffee chain pay a large sum in back taxes.

The European Commission, the bloc's chief antitrust body, said Amsterdam had allowed the US coffee chain to shift revenue from countries with high taxes to lower-taxed subsidiaries in the Netherlands.

Under the so-called sweetheart deal, Starbucks was able to pay lower corporate income taxes. In a 40-page letter sent to the Dutch tax authorities in June but made public on Friday, European regulators said this gave the coffee giant an unfair advantage and constituted illegal state aid.

The European investigation focused on an arrangement known as transfer pricing, which sees multinational companies charge for goods and services sold among their subsidiaries. By inflating the price of goods sold from subsidiaries in low-tax countries to those in high-tax ones, companies can save on taxes.

The EU's assertions came a week after journalists' revelations about how some of the world's biggest companies - including Pepsi, IKEA, FedEx and Deutsche Bank - were dodging billions of dollars in taxes by directing their profits through subsidiaries in Luxembourg.

cjc/hg (AFP, Reuters)