Wednesday

18th Jan 2017

EU probes French gas firm's Luxembourg tax dealings

  • Tax rulings "contradict national taxation rules and allow GDF Suez to pay less tax than other companies", competition commissionner Vestager said. (Photo: European Parliament)

The European Commission opened on Monday (19 September) a case over tax rulings granted by Luxembourg to French gas company Engie that it says amount to illegal state aid.

Engie, which was at the time called GDF Suez, is currently owned at 33 percent by the French state.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

The tax rulings the commission is investigating were first issued in 2008 and allowed two GDF Suez companies to lend money to two other GDF companies, with the four entities avoiding taxes due in normal cases.

The two borrowers could make provisions for interest payments, even while the loans were with zero interest, and file them as tax-deductible expenses.

For the lenders, the loans were converted into shares in the borrowing firms. The benefits were not taxed because in Luxembourg equity investments are exempt from taxation.

"A single company cannot have the best of two worlds for one and the same transaction," EU competition commissioner Margrethe Vestager said in a statement.

"Financial transactions can be taxed differently depending on the type of transaction, equity or debt," she pointed out.

The tax rulings allowing the schemes "contradict national taxation rules and allow GDF Suez to pay less tax than other companies", she added.

The decision to open the case comes as Vestager is starting a visit in the US, where the administration and businesses have strongly criticised the commission's sate-aid stance.

The US treasury said last month that the commission's order to Apple to pay over €13 billion to Ireland was "disappointing" and would "undermine the important spirit of economic partnership between the US and the EU”.

The timing of the new case has prompted speculation that Vestager is trying to appease the US by showing she also takes on European firms.

A commission spokesman denied the claims, saying that the commission "always apply state rules to everybody".

The GDF Suez case does not stem from the LuxLeaks revelations published in 2014 but from a review of tax rulings issued in member states that was launched in 2013.

The review was extended in December 2014 after the LuxLeaks revelations, and about 1,000 tax rulings were examined.

The GDF Suez case is the first opened after the review.

The commission did not say how much taxes it estimates GDF Suez avoided with the tax rulings, nor did it say whether it was the only company in that case in Luxembourg.

Stakeholders' Highlights

  1. Caritas EuropaEU States to Join Pope Francis’s Appeal to Care for Migrant Children
  2. UNICEFNumber of Unaccompanied Children Arriving by sea to Italy Doubles in 2016
  3. Nordic Council of Ministers"Nordic Matters" Help Forge Closer Bonds Between the UK and the Nordic Region
  4. Computers, Privacy & Data ProtectionThe age of Intelligent Machines: join the Conference on 25-27 January 2017
  5. Martens CentreNo Better way to Lift Your Monday Blues Than to Gloss Over our Political Cartoons
  6. Dialogue PlatformThe Gulen Movement: An Islamic Response to Terror as a Global Challenge
  7. European Free AllianceMinority Rights and Autonomy are a European Normality
  8. Swedish EnterprisesHow to Create EU Competitiveness Post-Brexit? Seminar on January 24th
  9. European Jewish CongressSchulz to be Awarded the European Medal for Tolerance for his Stand Against Populism
  10. Nordic Council of Ministers"Adventures in Moominland" Kick Off Nordic Matters Festival in London
  11. PLATO15 Fully-Funded PhDs Across Europe on the Post-Crisis Legitimacy of the EU - Apply Now!
  12. Dialogue PlatformInterview: Fethullah Gulen Condemns Assassination of Russian Ambassador to Turkey