Starbucks Ordered to Pay 20-30 Million Euros in Back Tax
On October 21st, the European Commission held a conference ordering Starbucks, among other companies, to recover what they consider unpaid taxes. The Commission claims that Starbucks, headquartered in Amsterdam, used a British shell company, Alki, to avoid paying tens of millions of euros in tax. Starbucks transferred millions to Alki (an un-taxed entity) in royalty payments for coffee roasting techniques.
Antitrust Commissioner, Margrethe Vestager, ordered 20-30 Million Euros to be collected by the Dutch Government from Starbucks. This comes amidst a massive crackdown on European tax avoidance techniques employed by dozens of multi-national companies. The European Commission estimates these avoidance techniques to have cost the EU 1 trillion euros.
Regulations on taxation is fragmented in the EU with different rules being applied in each country. "We cannot achieve fair tax competition in Europe with enforcement of EU state aid rules alone," Vestager said. "The fight against tax evasion and tax avoidance can only be won with a combination of state aid rules and legislative responses."
Starbucks claims there was an error in the commission’s assessment. The company has refuted the European Commission’s accusations and claim to have paid a global tax rate of 33% last year. "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 Starbucks spokesman said.
It is unclear if the European Union will be able to rally and unify the tax codes in its member nations. The European Commission will be continuing to issue demands to companies it finds to be in breach of its laws, but it is unknown what the true ramifications will be.