The recent ruling on Starbucks and its Dutch tax agreements raises concerns about the power of the European Commission and the validity of advance pricing agreements, says Heather Self, partner at Pinsent Masons LLP
There is clear political support, across the Organisation for Economic Cooperation and Development (OECD) and probably beyond, for the principle that companies should pay tax on their economic profits wherever those profits arise. Within the Base Erosion and Profit Shifting (BEPS) project, the issue of ‘double non taxation’ has been highlighted, and is being addressed by Actions 2 (hybrid mismatches) and 6 (treaty abuse) in particular.
Within the EU, a parallel line of attack has opened up in the form of investigations by the European Commission into whether certain favourable tax rulings could constitute state aid. These investigations are by the competition commissioner, not the tax commissioner, which may be causing a certain amount of political friction within the EU team.
