Starbucks' EU court victory on tax bill to go unchallenged, Vestager says

2 December 2019 10:34am

27 November 2019, by Lewis Crofts and Nicholas Hirst

Starbucks’ successful challenge before an EU court against a European Commission decision ordering it to pay millions in extra taxes to the Netherlands will not be appealed, the bloc’s competition boss Margrethe Vestager has told MLex.

The judgment marked a significant — though not fatal — setback for the commission’s efforts to overturn sweetheart tax deals on the basis of state aid rules.

The announcement, made in an interview with MLex, does not prevent the regulator from reopening its probe into Starbucks and finding that, even under the new criteria set by the court, its tax arrangements were illegal.

On Sept. 24, the EU's General Court overturned a commission decision instructing the Netherlands to claw back up to 30 million euros ($33 million today) in alleged tax breaks to Starbucks.

The judges held that it was not enough for EU officials to fault the way the Dutch tax authority calculated the profits that were taxable. Rather, officials needed to show that the right method would have resulted in Starbucks paying more taxes. 

On the same day, the commission won a separate court case challenging a decision ordering Fiat to reimburse a similar amount of tax breaks to Luxembourg.

Taken together, the judgments were viewed as having broadly upheld the principles underpinning the commission’s crusade against sweetheart tax details, if not their precise application. 

"After carefully assessing the General Court judgment of 24 September 2019 concerning the tax treatment of Starbucks in the Netherlands, the Commission has decided not to appeal the Court’s ruling to the European Court of Justice," the commission said in a statement to MLex today, confirming Vestager's comments.

EU reforms

EU state aid investigators continue to formally probe the tax arrangements of Huhtamäki, Nike and Ikea.

In parallel, the commission has requested an update on EU countries' approach to issuing tax rulings. 

Vestager described it as “taking stock,” and said she might open further probes. 

However, she gave equal importance to two other ongoing developments — the implementation of more than a dozen pieces of EU legislation approved in recent years and the adoption of a new OECD framework for taxing digital companies.

“If [the OECD] can pull this off, that would be great,” Vestager said. “Obviously, if that cannot happen we stand ready, on the basis of the work we did before ... to pick it up with a European approach.”