The list of international tax havens is long and each country has it’s own benefits. However, no matter which country people or businesses choose to partner with in an effort to save on their tax bill, that effort is getting harder every day. It seems that more and more, government officials and lawmakers are looking into these tax-saving deals and trying to crack down on them. The latest such effort comes from European Union (EU) authorities, which are trying to put a big chill on Starbucks.
Top Tax Havens
American companies poor a lot of money in to the Netherlands in an effort to save on their tax bill. Thanks to the lenient tax laws in countries such as the Netherlands, Ireland, Luxembourg, the Cayman Islands and Bermuda, American corporations can legally avoid billions of dollars in corporate taxes. However, as with all tax savings efforts, there are others who want to put a stop to them. In this case, EU authorities have publicly accused the Netherlands of giving Starbucks a special deal that helped the coffee maker save a bundle in taxes. EU officials claim that the deal could be illegal.
The Problem
At issue is a deal that allowed Starbucks to move revenue from countries with higher taxes to other company subsidiaries that are located in the Netherlands and which pay lower taxes. The arrangement, according to EU officials, is known as transfer pricing and it allows large companies to charge for goods and services that are sold among their subsidiaries. Companies save on their taxes by jacking up the price on the goods that are sold in countries with low taxes to subsidiaries that are located in high-tax countries.
Starbucks Is Not Alone
Starbucks is not the first company to face this kind of accusation and it probably won’t be the last. Plus, although regulators are doing every thing they can to put a stop to these kinds of deals, the companies are also working hard to ensure that these deals remain available. In Starbucks’ case, the company has already hired a crisis communication firm and the coffee maker also moved its headquarters in the region from Amsterdam to London.
Companies Won’t Back Down Easy
Meantime, even if European authorities are able to crack down on these deals and put a stop to them, American companies might still get credit on their tax bills back in the United States. That’s because according to some experts, these multi-national companies would more than likely pay back taxes instead of paying a fine. Plus, even if some tax loopholes are closed, it’s very likely that new ones will open up to replace them, thus giving American companies new opportunities to save on their tax bills.
The Game Goes On
In the end it seems that as long as there are companies who are looking for ways to save on their taxes by investing overseas, there will be countries that look for ways to help accommodate them. Even though some European lawmakers will try to put a stop to these kinds of deals, the companies will always argue that they are doing nothing illegal and that their motives are pure, and not simply driven by tax savings.
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