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Starbucks and Netherlands Are Accused by E.U. of Making Unfair Tax Deal E.U. Accuses Starbucks and Netherlands of Making Unfair Tax Deal
(about 3 hours later)
BRUSSELS — The European Union authorities on Friday publicly accused the Netherlands of making a special deal with Starbucks that helped the coffee company lower its taxes, creating unfair advantages over other countries in the bloc.BRUSSELS — The European Union authorities on Friday publicly accused the Netherlands of making a special deal with Starbucks that helped the coffee company lower its taxes, creating unfair advantages over other countries in the bloc.
The report by the bloc’s competition commissioner — a preliminary finding in a review of Starbucks’ past arrangements with the Netherlands — is the latest sign of mounting concern, and indignation, over the scale of tax breaks for multinational companies in a period of weak growth and high unemployment in many parts of Europe.The report by the bloc’s competition commissioner — a preliminary finding in a review of Starbucks’ past arrangements with the Netherlands — is the latest sign of mounting concern, and indignation, over the scale of tax breaks for multinational companies in a period of weak growth and high unemployment in many parts of Europe.
The case focuses on a tax ruling by the Dutch authorities that may have allowed Starbucks to pay less tax than it should have by allowing it to shift revenues away from the Netherlands, where it had its European headquarters until recently.The case focuses on a tax ruling by the Dutch authorities that may have allowed Starbucks to pay less tax than it should have by allowing it to shift revenues away from the Netherlands, where it had its European headquarters until recently.
The European Commission, the bloc’s executive body, said it “considers that the measure at issue appears to constitute a reduction of charges that should normally be borne by the entities concerned in the course of their business,” according to the 40-page report to the Dutch government formally describing the scope of the investigation and why it is worth pursuing.The European Commission, the bloc’s executive body, said it “considers that the measure at issue appears to constitute a reduction of charges that should normally be borne by the entities concerned in the course of their business,” according to the 40-page report to the Dutch government formally describing the scope of the investigation and why it is worth pursuing.
The report was dated June 11 but was released on Friday. It was addressed to Frans Timmermans, the former Dutch foreign minister who recently became first vice president of the European Commission.The report was dated June 11 but was released on Friday. It was addressed to Frans Timmermans, the former Dutch foreign minister who recently became first vice president of the European Commission.
Any eventual decision against the Netherlands could force the government to recoup large amounts of back taxes from Starbucks.Any eventual decision against the Netherlands could force the government to recoup large amounts of back taxes from Starbucks.
The case is a response by the European Commission to calls to stop companies from seeking countries that offer specialized tax arrangements and then finding ways to account for their profits there, even when much of the money is made elsewhere.The case is a response by the European Commission to calls to stop companies from seeking countries that offer specialized tax arrangements and then finding ways to account for their profits there, even when much of the money is made elsewhere.
Starbucks established its manufacturing operations in the Netherlands in 2001, and the European Commission first announced the investigation in June.Starbucks established its manufacturing operations in the Netherlands in 2001, and the European Commission first announced the investigation in June.
Starbucks said in April that it was moving its European headquarters to Britain, where it has nearly 800 stores and is growing its business, from the Netherlands, where it has about 50 stores. That move followed intense criticism of Starbucks two years ago for paying low corporate taxes in Britain.Starbucks said in April that it was moving its European headquarters to Britain, where it has nearly 800 stores and is growing its business, from the Netherlands, where it has about 50 stores. That move followed intense criticism of Starbucks two years ago for paying low corporate taxes in Britain.
The European inquiry deals with so-called transfer pricing, or the way companies shunt profits and losses between subsidiaries by accounting for them as internal corporate payments for goods or, as is increasingly common, for copyright or patent royalties.The European inquiry deals with so-called transfer pricing, or the way companies shunt profits and losses between subsidiaries by accounting for them as internal corporate payments for goods or, as is increasingly common, for copyright or patent royalties.
The case focuses on a roasting plant in Amsterdam that uses Starbucks’ intellectual property rights for processes like blending and roasting. Regulators suspect that the Dutch authorities attributed too little profit to these Starbucks operations.The case focuses on a roasting plant in Amsterdam that uses Starbucks’ intellectual property rights for processes like blending and roasting. Regulators suspect that the Dutch authorities attributed too little profit to these Starbucks operations.
When European Union officials announced the investigation in June, Starbucks said that it had complied with all relevant tax rules, laws and international guidelines.When European Union officials announced the investigation in June, Starbucks said that it had complied with all relevant tax rules, laws and international guidelines.
The Dutch authorities said on Friday that they were confident the commission would find there was no unlawful aid. In a letter to the Dutch House of Representatives, Eric Wiebes, the state secretary for finance, wrote that the arrangement with Starbucks “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.”The Dutch authorities said on Friday that they were confident the commission would find there was no unlawful aid. In a letter to the Dutch House of Representatives, Eric Wiebes, the state secretary for finance, wrote that the arrangement with Starbucks “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.”
In September, the European Commission published a similar preliminary report of Ireland’s past tax arrangements with Apple, chastising Irish officials for giving the company unlawful so-called state aid that masqueraded as tax breaks. The commission said Ireland might need to collect back taxes from Apple that analysts said could reach into the billions of dollars.In September, the European Commission published a similar preliminary report of Ireland’s past tax arrangements with Apple, chastising Irish officials for giving the company unlawful so-called state aid that masqueraded as tax breaks. The commission said Ireland might need to collect back taxes from Apple that analysts said could reach into the billions of dollars.
It was not immediately clear how much Starbucks might have to pay in back taxes if there were a ruling against it and the Netherlands in the case. A final decision could take years.It was not immediately clear how much Starbucks might have to pay in back taxes if there were a ruling against it and the Netherlands in the case. A final decision could take years.
Starbucks’s global sales last year were $16.45 billion, but only 8 percent of that amount was generated in Europe, the Middle East and Africa.Starbucks’s global sales last year were $16.45 billion, but only 8 percent of that amount was generated in Europe, the Middle East and Africa.
Another European Union country, Luxembourg, has been the subject of intense scrutiny since Nov. 5, when the International Consortium of Investigative Journalists published a report accusing more than 300 companies, including the Pepsi Bottling Group, Ikea and FedEx, of benefiting from preferential tax deals with the government of Luxembourg.Another European Union country, Luxembourg, has been the subject of intense scrutiny since Nov. 5, when the International Consortium of Investigative Journalists published a report accusing more than 300 companies, including the Pepsi Bottling Group, Ikea and FedEx, of benefiting from preferential tax deals with the government of Luxembourg.
The European Commission is investigating the tax incentives Luxembourg offered to Amazon and to a unit of Fiat.The European Commission is investigating the tax incentives Luxembourg offered to Amazon and to a unit of Fiat.
Those cases, and the inquiries concerning Starbucks and Apple, were brought by Joaquín Almunia, the former antitrust chief of the European Commission, this year. Those investigations have been taken over by Margrethe Vestager, who replaced Mr. Almunia.Those cases, and the inquiries concerning Starbucks and Apple, were brought by Joaquín Almunia, the former antitrust chief of the European Commission, this year. Those investigations have been taken over by Margrethe Vestager, who replaced Mr. Almunia.
Ms. Vestager is working under Jean-Claude Juncker, whose posts in Luxembourg from 1989 to 2013 included finance minister, treasury minister and prime minister, and who now leads the commission. That has created concerns that Mr. Juncker has conflicts of interest in the tax investigations.Ms. Vestager is working under Jean-Claude Juncker, whose posts in Luxembourg from 1989 to 2013 included finance minister, treasury minister and prime minister, and who now leads the commission. That has created concerns that Mr. Juncker has conflicts of interest in the tax investigations.
Mr. Juncker said on Wednesday that he would not interfere in the investigations and would make himself answerable to Ms. Vestager if necessary.Mr. Juncker said on Wednesday that he would not interfere in the investigations and would make himself answerable to Ms. Vestager if necessary.
Mr. Juncker also pledged that his deputy, Mr. Timmermans, would not interfere in Ms. Vestager’s investigation of Starbucks.Mr. Juncker also pledged that his deputy, Mr. Timmermans, would not interfere in Ms. Vestager’s investigation of Starbucks.
“The commission in the past has always clearly been independent in these assessments,” Mr. Timmermans said during a news conference with Mr. Juncker on Wednesday that was focused on the recent revelations in Luxembourg.“The commission in the past has always clearly been independent in these assessments,” Mr. Timmermans said during a news conference with Mr. Juncker on Wednesday that was focused on the recent revelations in Luxembourg.