Dutch Deny Tax Deal With Starbucks Is Illegal

The Dutch government has insisted its tax deal with US multinational Starbucks (Swiss: SBUX.SW - news) is not forbidden under international law.

Its statement comes after European Union regulators said the arrangement may amount to illegal state aid.

The European Commission said it suspects the Dutch tax ruling allows Starbucks, the world's biggest coffee chain, to lower its taxable profit.

As a result its tax liability is lower, in a way that is at odds with the spirit of accounting rules.

The EU move comes amid a crackdown by officials over accounting practices that aid tax minimisation.

Starbucks has operated in Britain for almost two decades, with it reporting a loss for nearly every year, despite telling investors its British operations were successful.

Complex transfer pricing structures have seen outlets of Starbucks purchase beans from a Swiss subsidiary of the US firm, before they are roasted in the Netherlands.

Earlier this year, Starbucks said it would move its European headquarters from the Netherlands to London, amid mounting UK public and political criticism.

Luxembourg, Ireland (Other OTC: IRLD - news) , Malta, Belgium, Cyprus and Gibraltar are also facing scrutiny over tax deals they have struck with other multinational companies, many of them tech-focused.

Criticism is also swirling around the newly appointed European Commission boss Jean-Claude Juncker, who was prime minister and finance minister of Luxembourg for more than 20 years.

It has also caused an intensifying of calls for a more harmonised tax system in the 28-country bloc.

Many big multinationals, including Google (Xetra: A0B7FY - news) , Apple (NasdaqGS: AAPL - news) , Microsoft (NasdaqGS: MSFT - news) , Twitter (Xetra: A1W6XZ - news) and Amazon have sought to weather the tax storm both in Europe and in the US - where keeping profits offshore is known as inversion.

Meanwhile, as representatives of the G20 nations prepare to meet in Australia, the host treasurer said tax avoidance would be a key plank of the presidency.

Joe Hockey said profit-shifting amounted to "theft" and the issue now has American support.

"They were cautious at first, but obviously the United States itself has been missing out on revenue from a number of these large multinationals," Mr Hockey said.

"Now (NYSE: DNOW - news) , with everyone committed to a plan and everyone committed to the outcomes of the plan, I am confident that we're going to start seeing some very aggressive approaches towards the largest multinationals."