The European Commission is investigating a Belgian system allowing companies to reduce their tax bills significantly, it said on Tuesday (3 February), widening its inquiry into tax deals struck with multinationals across the EU.
The Commission, which rules on competition and subsidies in the EU, said deductions granted through Belgium’s “excess profit” tax system usually amount to more than 50% of profits and can sometimes reach 90%.
Excess profits are calculated as being advantages, such as economies of scale or intra-group synergies, that result from being a multinational group. The Commission said the deductions significantly overestimate the benefits of being in a multinational group.
“The Belgian ‘excess profit’ tax system appears to grant substantial tax reductions only to certain multinational companies that would not be available to stand-alone companies,” Margrethe Vestager, commissioner in charge of competition policy, said in a statement.
Vestager said that if the Commission’s concerns were confirmed, the Belgian tax scheme would be a serious distortion of competition unduly benefiting a selected number of multinationals.
A company needs prior confirmation by Belgian tax authorities through a tax ruling for the deductions to apply.
The Commission said such rulings 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.
Belgium’s finance ministry was not immediately available for comment.
The Commission is also investigating the tax arrangements of Amazon and Italian carmaker Fiat in Luxembourg, Apple in Ireland and Starbucks in the Netherlands.
In December, the Commission asked all 28 member countries for details of tax deals made with companies between 2010 and 2013.
Tax avoidance, while not illegal, has in recent years galvanised authorities into taking action to try to ensure that multinational companies pay a fair share of their profit in tax.