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20th Jul 2018

Belgium on EU radar over corporate tax scheme

  • Vestager: 'We saw the excess profit tax scheme mentioned in the news and we took the lead from there' (Photo: European Commission)

Belgium has slipped on to the European Commission's anti-trust radar for a scheme allowing multinationals to escape paying due tax on as much as 90 percent of their profits.

EU competition commissioner Margrethe Vestager Tuesday (3 February) noted that the scheme only benefits multinationals and not "stand alone" companies or Belgian-only companies.

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"If our concerns are confirmed, this generalised scheme would be a serious distortion of competition," she said, adding: "as part of our efforts to ensure that all companies pay their fair share of tax, we have to investigate this further."

Vestager's announcement comes on the back of current EU investigations in to sweetheart tax deals given to Apple in Ireland, Starbucks in the Netherlands, as well as Fiat finance and Amazon in Luxembourg.

Those investigations were opened by the last commission before it left office at the end of October.

But they took on greater resonance when a media investigation in November revealed that Luxembourg - under Jean-CLaude Juncker, now the commission president - handed out favourable tax deals to hundreds of major companies.

Vestager’s department is looking into whether these deals, which have resulted in many treasuries elsewhere missing out on billions of euros of tax revenues, breach state aid rules.

While tax rulings are not per se illegal, public tolerance for such deals has taken a nosedive amid high unemployment and slashed public spending in Europe.

Vestager said she was anxious not to be seen as conducting a witch-hunt against certain companies, but investigating "a scheme”.

The Belgian scheme allows multinational to substantially reduce their corporation tax liability in the country using the argument that they have made "excess profits" due to being part of a multinational arrangement.

Companies are able to get deductions on 50 percent of the profits covered by the agreements, and in some cases, as much as 90 percent.

Vestager noted that the Belgian set-up did not come to light as a result of the LuxLeaks investigation but from reading the news.

“We saw the excess profit tax scheme mentioned in the news and we took the lead from there,” she said. “And here we are with an open investigation.”

The so-called LuxLeaks revelations put Juncker in an uncomfortable spotlight, particularly after he campaigned for the commission post on a ticket of reconnecting citizens with the EU.

After weathering the immediate storm, Juncker promised to be proactive in looking at whether tax deals - offered by the vast majority of member states - are compliant with EU state aid rules.

The commission has since asked all member states to provide information on how they attract companies with tax breaks.

It has also promised a law on making sharing this information obligatory as well as pledged to kickstart stalled legislation on setting up a common corporate tax base.

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