Wednesday

17th Apr 2024

Corporate tax breaks could be classed as illegal aid, warns EU competition chief

  • Regimes allowing companies to pay small tax bills could be classed as government aid, Almunia warned (Photo: stumayhew)

The European Commission will assess whether governments re-writing their tax laws to offer corporate tax breaks amounts to illegal state aid, the bloc's competition chief said on Tuesday (11 February).

Speaking at the European Competition Forum in Brussels, EU commissioner Joaquin Almunia said he would investigate whether moves by national governments to tailor their tax laws to allow companies to avoid paying tax had the same effect as a subsidy.

Read and decide

Join EUobserver today

Get the EU news that really matters

Instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

Subsidising certain businesses could be deemed as anti-competitive, breaching the bloc's rules on state aid.

"Because of the gaps in national tax laws, many of the largest multinational companies pay very low taxes, and they don’t need to break the law to do it," said Almunia.

"In those cases where national laws or tax-administration decisions permit or encourage these practices, there might be a State aid component involved and I intend to go to the bottom of it."

The remarks by the Spanish commissioner's, who described the practice of "aggressive tax planning" as going against the principles of the EU's single market, are the latest in a series of salvos by EU officials aimed at clamping down on corporate tax avoidance.

In November, the bloc's taxation commissioner Algirdas Semeta unveiled plans to re-write the EU's rules on the tax status of parent and subsidiary companies to prevent firms from setting up 'letter-box' companies in different countries to slash their tax bills.

The practice has been widely publicised in recent years.

For example, coffee shop giant Starbucks paid UK corporation tax of £8.6 million between 1998 and 2011 on sales of over £3 billion.

Meanwhile, US-based software giant Apple was revealed to be paying a tax rate equivalent to 1.9 percent on their profits made outside the US by designating its office in the Irish city of Cork as the firms' international headquarters.

Internet companies Facebook, Google and Amazon are also prominent names in the list of companies taking advantage of Europe's patch-work tax regimes.

The European Commission is already examining corporate tax arrangements in several member states and has requested information from authorities in Ireland, the Netherlands and Luxembourg.

"A limited number of companies actually manage to avoid paying their proper share of taxes by reaching out to certain countries and shifting their profits there," said Almunia.

He added that the practice "undermines the fairness and integrity of tax systems" and was "socially untenable."

EU leaders mull ways to arrest bloc's economic decline

With Europe falling behind the US and losing ground to China, the special European Council will focus mainly on Europe's economic competitiveness in the global arena. But talks will also cover Ukraine, Turkey and the Middle East.

Police ordered to end far-right 'Nat-Con' Brussels conference

The controversial far-right "National Conservatism" conference taking place in Brussels was ordered to halt at the behest of the local neighbourhood mayor — in what critics described as a publicity victory for the populist right.

Opinion

How Hungary's teachers are taking on Viktor Orban

Orban and his administration are pursuing a strategy of running-down public education in Hungary. They have been explicit in their aims and how their assault on 'non-Christian' teachers is a small price to pay for the cultural shift they want.

Opinion

How Hungary's teachers are taking on Viktor Orban

Orban and his administration are pursuing a strategy of running-down public education in Hungary. They have been explicit in their aims and how their assault on 'non-Christian' teachers is a small price to pay for the cultural shift they want.

Column

What do we actually mean by EU 'competitiveness'?

Enrico Letta and Mario Draghi are coming up with reports on the EU's single market and competitiveness — but although 'competitiveness' has become a buzzword, there's no consensus on a definition for what it actually means.

Latest News

  1. EU leaders mull ways to arrest bloc's economic decline
  2. Police ordered to end far-right 'Nat-Con' Brussels conference
  3. How Hungary's teachers are taking on Viktor Orban
  4. What do we actually mean by EU 'competitiveness'?
  5. New EU envoy Markus Pieper quits before taking up post
  6. EU puts Sudan war and famine-risk back in spotlight
  7. EU to blacklist Israeli settlers, after new sanctions on Hamas
  8. Private fears of fairtrade activist for EU election campaign

Stakeholders' Highlights

  1. Nordic Council of MinistersJoin the Nordic Food Systems Takeover at COP28
  2. Nordic Council of MinistersHow women and men are affected differently by climate policy
  3. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  4. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  5. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  6. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?

Join EUobserver

EU news that matters

Join us