The European Commission said on Friday the Netherlands has given coffee company giant Starbucks unfair tax breaks which amount to an illegal state subsidy.

The claim is made in the initial conclusions of a lengthy investigation by the European Commission into the tax agreement between the Netherlands and the American firm.

The commission says the US company paid less tax than it should have done under Dutch law on profits made at its roasting facility, which amounts to an illegal state subsidy.

‘In light of the foregoing considerations, the Commission’s preliminary view is that the deal constitutes state aid according to the EU treaty rules,’ the 40-page Commission letter is quoted as saying by news agency AFP.

‘The last thing the Netherlands wants is that companies shop around long enough so they don’t have to pay any tax over their profits,’ Dutch finance minister Jeroen Dijsselbloem told broadcaster Nos in an initial reaction.

The charge comes just days after the national auditors office said the Dutch tax system, based on treaties which exempt multinationals from tax on profits made abroad and on royalties, conforms to international rules and the tax office exercises sufficient control.

The Netherlands has long been under fire for its generous programme of tax treaties.

Headquarters

The Starbucks probe is one of three investigations into tax deals which were announced in June. The others focused on Apple in Ireland and Fiat Finance and Trading in Luxemburg.

In April, Starbucks said it is moving its European headquarters from Amsterdam to London at the end of this year, in the wake of a row over its low tax bill.

Starbucks paid some €700,000 in corporate taxes in the Netherlands in 2012.