EU shuts down Belgium tax breaks for multinationals

GMT 07:12 2016 Tuesday ,12 January

Arab Today, arab today EU shuts down Belgium tax breaks for multinationals

The EU says tax breaks offered major multinationals in Belgium
Brussels - AFP

The EU on Monday closed a major tax break that Belgium offered to dozens of multinationals, including beer giant AB InBev, and ordered the companies to return 700 million euros ($762 million) in unpaid taxes.

In the latest Brussels crackdown on tax avoidance, it ruled that the benefit to some 35 multinational companies was illegal and breached the European Union's rules on state aid to companies.

It comes in the wake of the "Luxleaks" scandal, which revealed details of tax breaks given to dozens of major firms in Luxembourg when current European Commission head Jean-Claude Juncker was prime minister.

"The European Commission has concluded that selective tax advantages granted by Belgium under its 'excess profit' tax scheme are illegal under EU state aid rules," Competition Commissioner Margrethe Vestager told a news conference.

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

She did not name the companies but sources familiar with the case said they included oil giant BP, chemical company BASF and Stella Artois brewer AB InBev, which is undergoing an $121-billion buyout of rival SABMiller.

The AB InBev case is especially sensitive in Brussels where fears are ripe that the company will use the tie-up as an opportunity to leave its Belgium headquarters to seek lower taxes elsewhere.
A spokeswoman for AB InBev said that even though the company was "disappointed by this decision, we remain confident that our tax rulings are in full compliance with the EU jurisprudence and that we have always complied with Belgian and international tax provisions".

-'Secret sweetheart deals'-

Belgian Finance Minister Johan Van Overtveldt said the decision was no surprise and that the tax break had been effectively suspended in February when the EU probe began.

"At this point we do not exclude any option. This also applies to the possibility of an appeal against the decision," the minister said in a statement sent to AFP.

The European Union has also launched investigations into other countries' tax deals: US tech giant Apple's deals with Ireland, coffee-shop chain Starbucks with The Netherlands and McDonald's with Luxembourg.

In October the Commission decided that Luxembourg and the Netherlands have granted unfair tax advantages to Fiat and Starbucks, respectively, and ordered the firms to repay some taxes.

EU rules say some tax breaks offered to big companies breach the bloc's rules on state aid, as they amount to a government subsidy that is aimed at attracting multinationals to do business in certain countries.

The deals are not illegal and critics say the EU has been unfairly targeting US companies.

But Vestager said that in the Belgium case, 500 of the 700 million euros in avoided taxes were owed by European companies.

Belgium's system, dubbed "Only in Belgium", allows companies to reduce tax by registering "excess profits" that allegedly result from the advantage of being part of a multinational group.

Vestager insisted those tax breaks should be available for stand-alone companies or Belgian groups, rejecting Belgium's claims that the system avoids "double taxation" in two or more countries.

Fair taxation activists said the decision, like the other EU moves after Luxleaks, was too cautious.

"Instead of unclear tax laws and secret sweetheart deals between governments and multinational corporations, we need clear rules that ensure everyone pays their fair share," said Tove Maria Ryding, a tax specialist at European Network on Debt and Development (Eurodad).


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