Starbucks Brews Up a Tax Storm as Apple Gets Set to Fight EU

By Publications Checkout
Starbucks Brews Up a Tax Storm as Apple Gets Set to Fight EU

Starbucks attacked “manifest errors” by European Union competition watchdogs as details of the coffee chain’s appeal of a €30 million tax repayment order were made public for the first time.

In a preview of Apple's €13 billion court fight with Brussels regulators, Starbucks criticised its EU order, saying officials made several "errors of assessment," according to a summary of its appeal published this week.

The Seattle-based company is asking the EU General Court in Luxembourg to annul last year’s EU decision accusing it of getting an unfair advantage from a tax arrangement with the Netherlands in violation of the bloc’s state aid rules.

The EU regulator violated those rules “by incorrectly establishing that the” advance pricing agreement “conferred an advantage, thereby committing various manifest errors of fact and assessment, failing to conduct a diligent and impartial examination and giving an inadequate statement of reasons,” Starbucks said, according to the summary.

Firing Line

EU Competition Commissioner Margrethe Vestager has prioritized the fight against special tax treatment for selected companies, arguing it amounts to illegal state aid. Starbucks and a Fiat Chrysler Automobiles NV unit were first in the firing line, being ordered to pay back taxes they allegedly avoided thanks to agreements with the Netherlands and Luxembourg.

While her team continues its quest to weed out unlawful deals from a list of more than 1,000 tax rulings, Vestager in August slapped Apple with a record multibillion euro bill, saying Ireland granted unfair deals that reduced the company’s effective corporate tax rate to as little as 0.005 percent in 2014. Ireland has already appealed the decision and Apple said it would follow.

In the Starbucks case, the commission said a Dutch unit paid millions of euros to a U.K.-based arm of the company that isn’t taxed in Britain, in exchange for a technique to roast coffee beans. Exaggerated tax-deductible royalty payments for this technique may have allowed Starbucks to unfairly lower its Dutch taxes.

The Netherlands already has an appeal pending against the EU’s decisions on Starbucks, and the case may be among the first to come to a court hearing.

“The commission will defend its decision in court,” spokesman Ricardo Cardoso said by e-mail. Starbucks didn’t immediately respond to a request for comment.

The EU is poised to publish details of its decision in the Apple case in the coming days and the iPhone maker is also expected to file its appeal before the end of the year.

Apple and EU competition watchdogs on Dec. 2 clashed over the issue on a public stage for the first time. An Apple lawyer said at a Copenhagen conference that the EU’s August decision is “seriously flawed” and implies Apple products such as its best-selling smartphones are designed in the Irish city of Cork, rather than the U.S. An EU official hit back, saying the company was creating a “very nice tax story.”

News by Bloomberg, eidted by Hospitality Ireland