EU orders Belgium to recoup €700m in illegal multinational tax breaks

THE EUROPEAN Commission has branded a Belgian tax scheme that enabled multinational companies to slash up to 90% off its profitable deductions and gain unfair advantage over its competitors as illegal and ordered it to recoup the €700m.

The order forms part of the EU’s renewed push to end corporate tax avoidance abuses and forms a core tenet of Margrethe Vestager, the EU competition chief’s crusade to prove to Washington that US companies are treated the same as European competitors.

“Belgium has given a select number of multinationals substantial tax advantages that break EU state aid rules,” said Margrethe Vestager, the EU’s competition chief. “It distorts competition on the merits by putting smaller competitors who are not multinational on an unequal footing.

“There are many legal ways for EU countries to subsidise investment and many good reasons to invest in the EU. However, if a country gives certain multinationals illegal tax benefits that allow them to avoid paying taxes on the majority of their actual profits, it seriously harms fair competition in the EU, ultimately at the expense of EU citizens.”

Belgium’s “excess profit” tax scheme, in force since 2005, allowed certain multinational groups to reduce the corporate tax base by between 50% and 90% to discount for so-called “excess profits” that allegedly came from being part of a multinational group.

The commission’s in-depth probe, which opened in February 2015, showed that the scheme “derogated from normal practice under Belgian company tax rules and the ‘arm’s length principle’ – illegal under EU state aid rules.

The commission’s decision compels Belgium to stop applying the “excess profit” scheme and in a bid to remove the unfair advantage beneficiaries have already enjoyed it now has to recover the full unpaid tax from at least 35 unnamed multinational companies that benefitted from the illegal scheme.

Among the companies believed to be involved are brewing behemoth, ABInBev, BP and BASF.

Related reading