The EU is set to investigate the tax arrangements of Starbucks

Starbucks are once again under scrutiny in Europe for their tax arrangements has European officials began an investigation into their current financial agreements with the Irish and Dutch governments.

Yesterday the European Commission announced that they would be looking at the tax affairs of Starbucks, Apple and Fiat.

“In the current context of tight public budgets, it is particularly important that large multinationals pay their fair share of taxes,” announced Joaquin Almunia, and Europe’s top competition regulator didn’t stop there as he raised concerns that preferential treatment may have been granted that breached state aid rules.

Under current legislation, European state aid laws ban tax breaks if they pose a risk to competition and business leaders across the continent have been complaining recently about the unfair advantages companies have gained by signing up to privileged tax breaks.

Starbucks is not a stranger to controversy surrounding their financial arrangements. The Seattle-based chain failed to pay tax in the United Kingdom for four years by exploiting legal loopholes. According to contemporary reports, the global brand paid just £8.6m in corporation tax over the course of their then fourteen year tenure within Britain – despite racking up sales in the region of £400m the year prior to the summer of 2013 when the story broke and received national coverage.

As part of their tax structure, Starbucks moved some money to a Dutch company under the guise of royalty payments, purchased their beans from Switzerland and paid high interest rates in order to borrow money from other entities under their own umbrella. The result of this complex arrangement was that the firm recorded an official profit just once in fifteen years.

But, after pressure from campaigners and politicians alike, Starbucks did pay an initial £5m tax payment to the UK authorities last June and have recently decided to relocate their European headquarters from Amsterdam to London.

The Commission has moved to investigate the prominent coffee chain, Apple and Fiat due to the numerous media reports that allege these companies – and others like them – have been handed substantial savings thanks to individual tax rulings.

“Fair tax competition is essential for the integrity of the single market, for the fiscal sustainability of our member states, and for a level-playing field between our businesses…[S]o we must do all we can to defend it,” stated the commissioner for taxation, Algirdas Semeta.

A spokesperson for Starbucks commented that that they complied with all relevant tax rules and current international guidelines.

photo: Dennis Hamilton (Creative Commons)