Starbucks Corporation (NASDAQ:SBUX) Accused Of Illegal Tax Deal

Starbucks Corporation (NASDAQ:SBUX) struck a tax deal with the Netherlands that the European Union (EU) says could be considered to be illegal state aid. Regulators of the EU have recently said that members are attracting investments by assisting them to avoid paying high tax or avoiding it completely.

Belgium, Cyprus, Gibraltar, Ireland, Malta and Luxembourg are also under scrutiny because of the same type of tax deals that they have made with other multinational companies. Other companies that seems to given unfair financial advantages and are under the microscope of the European Commissions are Fiat, the Italian carmaker; Amazon.com, Inc. (NASDAQ:AMZN), the online retailer and Apple Inc. (NASDAQ:AAPL), the makers of the iPhone.

The European Commission suspects that the tax ruling by the Dutch, which will allow Starbucks, the world’s largest coffee chain, to have lower taxable profits, which automatically lowers their overall tax bill, is not in line with the currently accepted accounting rulings. The view of the Commission is that this deal constitutes as state aid.

According to the EU, the Dutch tax authority deal will allow one of Starbucks Corporation (NASDAQ:SBUX) subsidiary, known as Starbucks Manufacturing EMEA BV, to declare a tax profit that is equal to the percentage of its cost. At the same time, it will allow the company to exclude most of this cost when making tax calculations.

How is this legally possible? Due to the fact that the cost of the coffee beans was excluded, of course. The Dutch justifies this statement by saying that the coffee beans are the property of a different Starbucks Corporation (NASDAQ:SBUX) subsidiary.

But, the European Union has noted that the coffee beans do appear on the balance sheet under the subsidiary of Starbucks Manufacturing EMEA.

Eric Wiebes, Deputy Finance Minister, says that the deal struck with Starbucks Corporation (NASDAQ:SBUX) is in line with the international transfer pricing standards and it is within the boundaries set forth by the government in an effort to make the business atmosphere more attractive to big international businesses.

If the European Union find that Starbucks Corporation (NASDAQ:SBUX) has been getting an unfair tax advantage, the company may be forced to repay taxes that were not paid.

Although any back taxes will likely be small, less than 20 million euros, the executives at the Starbucks Corporation (NASDAQ:SBUX) are confident that the regulators at the EU will conclude that they did not receive an illegal advantage.

Starbucks Corporation (NASDAQ:SBUX), founded in the early 1970s has rapidly become the largest American coffee company with Seattle, Washington housing their headquarters. With more than 20,730 stores in more than 60 countries, Starbucks Corporation (NASDAQ:SBUX) is running ahead of their immediate UK rival, Costa Coffee.

Inside the doors of a Starbucks, a barista will happily serve you a hot or cold beverage with a delicious pastry on the side.

Starbucks Corporation (NASDAQ:SBUX) opened the market today at 78.08. The market capital is 58.51B and the 52 week range is between 67.93 and 82.37 with 75% being inst. own.