On June 27, 2016 the European Commission published the non-confidential version of its decision of October 21, 2015 in which it decided that a tax ruling issued by the Dutch authorities in 2008 gave a selective advantage to Starbucks Manufacturing, which according to the European Commission has unduly reduced Starbucks Manufacturing’s tax burden since 2008 by an estimate of 20 to 30 million Euros.
In a press release issued on October 21, 2015, the European Commission stated that:
According to the European Commission in particular, the ruling artificially lowered taxes paid by Starbucks Manufacturing in 2 ways:
· Starbucks Manufacturing pays a very substantial royalty to Alki (a UK-based company in the Starbucks group) for coffee-roasting know-how;
· It also pays an inflated price for green coffee beans to Switzerland-based Starbucks Coffee Trading SARL.
Furthermore it was stated in the press release that the Commission's investigation established that the royalty paid by Starbucks Manufacturing to Alki cannot be justified as it does not adequately reflect market value. In fact, only Starbucks Manufacturing is required to pay for using this know-how – no other Starbucks group company nor independent roasters to which roasting is outsourced are required to pay a royalty for using the same know-how in essentially the same situation. In the case of Starbucks Manufacturing, however, the existence and level of the royalty means that a large part of its taxable profits are unduly shifted to Alki, which is neither liable to pay corporate tax in the UK, nor in the Netherlands.
According to the European Commission, the investigation revealed that Starbucks Manufacturing's tax base is also unduly reduced by the highly inflated price it pays for green coffee beans to a Swiss company, Starbucks Coffee Trading SARL. In fact, the margin on the beans has more than tripled since 2011. Due to this high key cost factor in coffee roasting, Starbucks Manufacturing's coffee roasting activities alone would not actually generate sufficient profits to pay the royalty for coffee-roasting know-how to Alki. The royalty therefore mainly shifts to Alki profits generated from sales of other products sold to the Starbucks outlets, such as tea, pastries and cups, which represent most of the turnover of Starbucks Manufacturing.
The decision non-confidential version of the European Commission’s decision has now been made available in 2 languages (a Dutch version and an English version).
Click here to be forwarded to the Dutch version (the original version) as available on the website of the European Commission.
Click here to be forwarded to the English version (working version) as available on the website of the European Commission.
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