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I've heard that when Starbucks was doing tax evasion (by exporting all their benefits in the Netherlands and then claiming that they don't have any benefits in the UK and France for example).

I've heard that a few years ago, the European Commission considered that Starbucks was cheating and this company was supposed to pay millions of euros to the Netherlands. Starbuck did not agree and protested to the European Council.

  • What was the final conclusion of the European Council?

  • What is the current juridic situation with Starbucks and the different countries of the European Union? (like France, Germany, Poland and Spain)

I've also heard that know Starbucks Europe is now located in the UK.

  • Does Brexit change the location where Starbucks pays taxes?
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  • If this is about the issue described in @Brian Z's answer, it is not tax evasion, it is tax AVOIDANCE. Starbucks did something that was legal under Dutch laws, then the European Commission retroactively changed the rules.
    – jamesqf
    Jul 20 '20 at 16:55
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    @jamesqf That's a gross misunderstanding or mischaracterization of the Commission's position and the way the EU (or even trade agreements in general) works. Importantly, all these decisions revolve around tax rulings, i.e. individual decisions that can only ever be evaluated a posteriori, not the general tax law that the Commission has no competence to change.
    – Relaxed
    Jul 20 '20 at 20:55
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It's not customary for a businesses to complain to the European Council. They can lobby it for new rules but its role is limited. The regular procedure to dispute a Commission decision of the kind you are alluding to is to bring the matter to the Court of Justice of the European Union (first to the General Court and, potentially, to the Court of Justice, which acts as a kind of appeal court in such cases).

The different steps of the Starbucks procedure are detailed on the Commission's website. The General Court annuled the Commission's decision in 2019 (full text of the decision) and the Commission apparently decided not to appeal that decision (interesting analysis). Starbucks won't have to pay back taxes to the Dutch government and the tax ruling presumably still stands.

Note that the Commission has taken a more activist stance on tax issues in recent years but it is limited in the legal basis it can invoke. In particular, it is not competent to review member states' tax codes or whether a particular Dutch or Irish tax scheme is unfair or beneficial to the EU as a whole. All it can do is check whether Starbuck got a better deal (through what is called a “tax ruling”) than other competing businesses could have gotten from the Dutch tax office, thus distorting competition.

That's why you will see that in these cases (the famous case against Apple follow the same basic framework), the Commission is not taking a decision against a business but against a member state and its tax authorities. The notion is that the tax ruling amounts to an illegal state aid for the business in question but not that the business cheated any of the local tax rules. The Dutch or Irish governments are therefore also a party to these cases, arguing that they should not receive any money. The companies are however allowed to launch an appeal of their own because their interests are potentially harmed by the Commission decision (they are the ones paying the taxes after all) and the court usually join both cases together.

Consequently, when the court upholds a decision (e.g. in the Fiat Chrysler case), the company has to pay taxes to the country where the tax optimization scheme is based (the Netherlands, Ireland, Luxemburg…) and not to the countries where the bulk of their retail operation is located (UK, Germany, France…). Ultimately, this is about tax authorities in different EU countries undermining each other and making these schemes less lucrative but not directly about how much taxes are paid locally (even if that's probably in the back of everyone's mind).

This also means the Commission cannot do much about transfer prices, whether or not Starbucks has to pay corporate taxes in the different member states or the general structure of the scheme they are using (the low tax rates for royalties in the Netherlands). All it can act on are tax rulings guaranteeing a low(er) rate in advance to a specific company.

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  • You're right I made a confusion between european council and the court of justice of european union. Do you know if the situation is different for non-eu countries like Switzerland and UK (since january)?
    – fedor
    Jul 21 '20 at 8:01
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    @fedor I don't know exactly. A cursory research reveals that Starbucks benefits from a tax ruling in Switzerland for another part of its operation. The UK has been a focal point of complaints since the beginning and for now the rules haven't changed (due to the so-called “transition period” after Brexit). Switzerland is also bound by bilateral agreements with the EU so potentially impacted by these decisions but the details are complex and I don't know them very well.
    – Relaxed
    Jul 21 '20 at 8:58
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    Another interesting question (and I don't know the answer) is whether Starbucks uses the same structure for the rest of its EMEA operation. For example, Starbucks has locations in Turkey, the UAE, etc. that are also managed from Amsterdam. Do these businesses report profits and pay taxes on them locally or are the profits also channeled through the Dutch tax optimization scheme? Does being outside of the EU afford these countries more legal leverage on Starbucks or less?
    – Relaxed
    Jul 21 '20 at 9:10
  • Yes, it's also an interesting question. As I understood the main idea. Nothing seems to bother Starbuck to use the same strategy (but maybe it's not useful if taxes are low in these countries).
    – fedor
    Jul 21 '20 at 9:13
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What I gather from the general media coverage is that Starbucks pays taxes everywhere it does businesses. The issue with respect to the Netherlands specifically is this, according to DW:

In 2008, Dutch officials allowed the coffee giant to shift profits by paying an unusual royalty to the company's British subsidiary and selling beans to another subsidiary in Switzerland. The complicated deal reportedly brought down its taxes from the standard 25% to just 2.5%.

The European Commission deemed the arrangement illegal in 2015 and ordered the Dutch authorities to collect up to €30 million (33$ million) in unpaid taxes.

That's from September 2019, I'm not seeing any more recent updates.

EDIT: According to Reuters Starbucks generally reports losses and therefore pays no income tax in either France or Germany. There may be other countries where this is also the case. However, the question doesn't specify what type of taxes. Starbucks almost certainly pays VAT (and possibly other taxes) even in these countries where they pay no income/capital gains.

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  • In this french documentary: youtube.com/watch?v=mTf_a1wtc-M, it's mentioned that Starbuck didn't pay taxes in UK and France. But you've answered to my first question, so thank you.
    – fedor
    Jul 20 '20 at 13:20
  • @fedor Without knowing the details of the claim (I haven't watched the doc) it may be wrong, certainly with regards to the UK at least as mentioned above and here in more detail. Very low taxes, but not zero taxes.
    – Brian Z
    Jul 20 '20 at 13:27
  • You can watch at 1:22:32 in the doc, the guy of Starbuck is claiming (in english)that no benefits are done in UK. About france, in france.attac.org/se-mobiliser/archives-campagnes/… (in french) it's mentioned : In 2015 Starbuck didn't pay a cent to the fiscal authority.
    – fedor
    Jul 20 '20 at 13:42
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    @BrianZ isn't VAT always paid by the end-consumer?
    – Dohn Joe
    Jul 20 '20 at 16:03
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    @BrianZ Actually, the traditional terminology in Europe is subtly different: companies are said to collect or charge it (to the consumer, on the state's behalf) but it's the consumer that actually pays. Importantly, VAT can be reclaimed by a business if it has paid more (to suppliers) than it has charged (to its clients) and is not charged on exports outside the EU because it is designed to be transparent to businesses and not something they have to pay (+1 to the answer).
    – Relaxed
    Jul 20 '20 at 16:46

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