EU accuses Netherlands on Starbucks tax deal

(BRUSSELS) - European Union regulators on Friday publicly accused the Netherlands of awarding coffee-shop giant Starbucks unfair tax breaks, laying out their case at a time when such practices have fueled an uproar.

The EU's allegation that a sweetheart tax arrangement with Starbucks amounts to an illegal subsidy by the Netherlands joins similar arguments against Ireland with Apple and Luxembourg with Amazon and Fiat.

The complex case, sent to the Dutch government in June but made public Friday, comes a week after the shock revelation that Luxembourg allowed hundreds of top companies -- including Pepsi, IKEA and Deutsche Bank -- to enjoy such sweetheart deals.

That revelation put huge pressure on incoming commission head Jean-Claude Juncker, who led Luxembourg as prime minister for 19 years when the deals were made, and now presides over probes delving into them.

- Eyes on Juncker -

With attitudes sharpening over the tax affairs of multinationals, Juncker has faced sharp criticism over the deals, known as "tax rulings", including some calls for him to step down.

But Juncker has vowed to fight tax evasion as head of the EU's executive and promised to stay out of the handling of the probes against Amazon and Fiat, leaving all responsibility to Margrethe Vestager, the EU's competition chief.

The 40-page letter from EU regulators is addressed to then-Dutch Foreign Minister Frans Timmermans, who has since become Junker's right hand man as commission vice-president.

The legal argumentation formally sets out the reasons for opening an investigation into the Netherland's arrangements with Starbucks.

In it, the EU alleges that Starbucks, with stores worldwide, secured an arrangement that allowed the coffee bar chain to use a Netherlands subsidiary to shift revenue from higher-tax countries to lower-taxed ones.

It also sheds light on royalty payments made by the Dutch subsidiary to a UK-based entity that Brussels suspects are unjustified and a possible means of channelling money back to the Starbucks parent company in the US.

"In light of the foregoing considerations, the Commission's preliminary view" is that the deal "constitutes state aid" according to the EU treaty rules, the letter said.

- Dutch deny state aid -

Commissioner Vestager, who took office along with Juncker on November 1, has said she would like the politically sensitive probes to reach their conclusion by spring of next year.

If found at fault, the companies would be asked to repay the state aid to the governments, though these decisions are often caught up for years in European courts.

The Dutch mission to the EU predicted that the commission will ultimately conclude The Hague granted no state aid to Starbucks.

It said in a statement that the Dutch tax authorities apply Organisation for Economic Cooperation and Development "standards to tax agreements with companies," adding "the Starbucks case is no exception to this rule."

- 'Not in our interest' -

Dutch finance minister Jeroen Dijsselbloem said during a visit to Brussels on Friday that the Netherlands had no intention of becoming a clearing house for tax evasion.

"The last thing the Netherlands wants is for companies to shop here and there until they pay no more at all on their profits. It's not in our interest. It's not in anyone's interest," Dijsselbloem said.

The issue of tax evasion is at the heart of a G20 summit in Brisbane, Australia where Juncker will represent the EU.

G20 host Australia has made tax avoidance a key plank of the summit with Treasurer Joe Hockey saying the practice of corporations shifting profits amounted to "theft".