EU orders Belgium to recover €700m in back taxes

Monday 11 January 2016 23.36
EU Competition Commissioner Margrethe Vestager
EU Competition Commissioner Margrethe Vestager

The European Commission has ordered Belgium to recover €700m from 35 large companies in back taxes in the EU executive's biggest move yet to crack down on tax avoidance by multinationals. 

The Commission said Belgium's "excess profit" tax system, whereby multinationals' economies of scale can enable them to reduce their tax bases by up to 90%, was illegal.

It said the scheme was illegal because it had been granted to a select number of large companies but not to smaller firms, distorting competition. 

It said it could not name the companies involved, but that they were mostly European corporations. 

The Commission rules on competition issues in the European Union.

It has faced accusations of a bias in its investigations against non-EU companies, notably US tech giants, as it investigates tax practices across the EU. 

In October it ruled that Starbucks and Fiat Chrysler Automobiles benefited from illegal tax deals with the Dutch and Luxembourg authorities, ordering each country to recover €20-30m in back taxes. 

It is also investigating the tax arrangements of Amazon in Luxembourg and Apple in Ireland. 

The EU's resolve to crack down on tax avoidance has galvanised national authorities in recent years into taking action to try to ensure that large companies pay a fair share of their profit in tax.

Belgian Finance Minister Johan Van Overtveldt said the ruling was in line with his expectations and that the "excess profit" system, introduced in 2005, had been on hold since February 2015, when the investigation began. 

Such back taxes would not affect Belgium's structural deficit, he said. 

Clawing back taxes would be complex and hit the companies involved and that Belgium kept all options open, including a possible appeal, he said.

 Under the Belgian scheme, multinationals could reduce their corporate tax bases by between 50-90% due to profits arising from, for example, economies of scale, which were not liable to tax in Belgium. 

The Commission has said Belgian tax authority rulings, typically for four years, were often granted to companies that had relocated a substantial part of their activities to Belgium or that have made significant investments in the country. 

"There are many legal ways for EU countries to subsidise investment and many good reasons to invest in the EU," EU Competition Commissioner Margrethe Vestager told a news conference. 

Vestager said the Commission would continue its inquiries into tax practices across the 28-member European Union.