Starbucks still uses illegal tax arrangement

American Starbucks still uses the tax construction it agreed upon with the Dutch government, even though the European Commission considers it to be illegal.

Appeal is not suspensive

Nevertheless, the company’s latest annual financial statements show that the company still calculates its taxable profit in this way. That is why it only pays 434,000 euro in profit tax, while it moved away 33 million euros’ worth of royalties to its European main office in London.

The arrangement was made in 2007, but dismissed by the European Commission last year. The Dutch government decided to appeal the decision, something Starbucks also plans to do. However, that appeal does not mean the original ruling is suspended and therefore Starbucks should follow the European Commission’s ruling for the time being. Because it now clearly refuses to do so, it may cause a problem with the Dutch tax services.