Dutch forced to collect €20m extra tax from Starbucks; Cabinet surprised by Europe

The European Commission has ruled that the sweetheart tax deal between Starbucks and the Dutch tax authorities amounts to illegal State aid. The government now has to recover between 20 and 30 million euros in back taxes from the multinational. The Dutch government has responded that they are "somewhat surprised" by the ruling and remain convinced that actual international standards were applied in crafting the law.

EU competition commissioner Margrethe Vestager made this announcement on Wednesday at the presentation of her investigation into the tax advantages Starbucks and car maker Fiat got from the Netherlands and Luxembourg respectively, according to The Guardian. The Fiat-Luxembourg deal has also been found illegal.

"Tax rulings that artificially reduce a company's tax burden are not in line with EU State aid rules. They are illegal. I hope that, with today's decision, this message will be heard by member state governments and companies alike. All companies, big or small, multinational or not, should pay their fair share of tax." the Danish Vestager said.

The sweetheart tax deal with Starbucks Manufacturing, a coffee roasting Starbucks subsidiary located in Amsterdam, involved a special construction that, according to the Commission, artificially lowered taxes paid by Starbucks in two ways. Starbucks pays a "very substantial" royalty to a UK based subsidiary for a coffee-roasting recipe. The company also pays an inflated price for green coffee beans to another subsidiary in Switzerland. Both these actions results in lower profits and therefore lower taxes.

The Dutch cabinet released a statement claiming surprise at the ruling. "The fact that the Commission observes that there would be State aid in the Starbucks file raises a lot of questions and requires careful consideration. The Netherlands is convinced that actual international standards are applied and shall, therefore, analyse the Commissions criticism carefully before taking a decision on further steps."

Starbucks was also quick to respond, saying that it tends to appeal against the ruling. "Starbucks shares the concerns expressed by the Netherlands government that there are significant errors in the decision, and we plan to appeal since we followed the Dutch and OECD rules available to anyone", a spokesperson said.