Commission extends tax probe to Belgium

European commissioner for competition says ‘excess profit’ tax system will be investigated.

A Belgium scheme offering tax breaks for multinationals is the latest national tax arrangement to come under the scrutiny of the European Commission.

The Commission announced today (3 February) the opening of another state-aid probe into the tax benefits granted by member states to international companies.
The tax scheme allows a few dozen multinationals to enjoy discounts of 50%-90% on their taxes, according to the Commission. It suspects that the companies, whose names it declined to disclose, received the advantages in exchange for relocating to Belgium or making significant investments into the country.

“The Belgian ‘excess profit’ tax system appears to grant substantial tax reductions only to certain multinational companies that would not be available to standalone companies,” said Margrethe Vestager, the European commissioner for competition. “If our concerns are confirmed, this generalised scheme would be a serious distortion of competition unduly benefitting a selected number of multinationals.”

The benefits enjoyed by the multinationals were set out in secret tax rulings struck between the firms and the Belgian authorities.

The decision extends a sprawling Commission inquiry into tax rulings. The Commission suspects some member states of using confidential tax rulings to hand out illegal state aid in order to lure companies away from other EU countries.

The Commission is already investigating tax rulings struck between Apple and Ireland, Starbucks and the Netherlands, and both Amazon and Fiat Trade and Finance and Luxembourg.

No names revealed

Vestager defended her decision not to name the companies involved in today’s investigation by saying that the Commission was investigating the tax scheme and not the companies. Some politicians from the United States have in the past complained that the Commission is using the tax probes to unfairly investigate US companies.

This is not the first time that Belgium’s tax arrangements have been questioned by the Commission on state- aid grounds. In 2003, the Commission ruled against a tax break for multinationals that housed co-ordination centres in Belgium. The scheme under investigation dates from 2004. The commissioner said that officials had learned of its existence from the media – a journal on European tax issues.

Pierre Moscovici, the European commissioner for economic and financial affairs and taxation, is drawing up a proposal that would require member states to exchange tax rulings among themselves.

“We welcome the EU Commission’s decision to investigate Belgium’s ‘excess profit’ regime, which is yet another piece of the nefarious puzzle that has enabled corporations to avoid their tax responsibilities in the EU,” said Philippe Lamberts, a Belgian Green MEP. “As the Luxembourg leaks revelations confirmed, multinational corporations have gone to great lengths to avoid paying taxes and they have been abetted in doing so by EU governments.”

Vestager is investigating a series of tax deals revealed as part of the ‘Lux Leaks’ scandal. Most if not all of those tax rulings date from a time when Jean-Claude Juncker, the European Commission president, was Luxembourg’s prime minister. He has denied being involved in striking the tax deals or having knowledge of their specifics.
The Commission’s decision to open an in-depth investigation does not prejudge the outcome. The Commission faces no deadlines in state-aid investigations.

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