EU shuts down Belgium tax breaks for multinationals

Antitrust commissioner Margrethe Vestager, during the interview in her office. [Jorge Valero]

The European Union on Monday (11 January) closed a major tax break that Belgium offered to multinationals, reportedly including beer giant AB InBev and British American Tobacco, and ordered the companies to return €700 million euros in unpaid taxes.

In the latest Brussels crackdown on tax avoidance, it ruled that the benefit to some 35 multinational companies was illegal and breached the European Union’s rules on state aid to companies.

It comes in the wake of the Luxleaks scandal, which revealed details of tax breaks given to dozens of major firms in Luxembourg when current European Commission President Jean-Claude Juncker was the country’s prime minister.

“The European Commission has concluded that selective tax advantages granted by Belgium under its ‘excess profit’ tax scheme are illegal under EU state aid rules,” Competition Commissioner Margrethe Vestager told a news conference.

“Belgium has given a select number of multinationals substantial tax advantages that break EU state aid rules. It distorts competition on merit by putting smaller competitors who are not multinational on an unequal footing,” Vestager said.

She did not name the companies but reports said targets included Stella Artois brewer AB InBev, which is undertaking a $121 billion buyout of rival SABMiller.

Seeing AB InBev use the tie-up as an opportunity to leave Belgium for lighter taxes elsewhere has been a major concern in Brussels.

Secret sweetheart deals

Belgian Finance Minister Johan Van Overtveldt said he had expected the decision and therefore suspended the tax break to new companies as soon as the EU probe began in February.

“At this point we do not exclude any option. This also applies to the possibility of an appeal against the decision,” the minister said in a statement sent to AFP.

The European Union has also launched investigations into other countries’ tax deals: US tech giant Apple’s deals with Ireland, coffee-shop chain Starbucks with The Netherlands and McDonald’s with Luxembourg.

In October the Commission decided that Luxembourg and the Netherlands had granted unfair tax advantages to Fiat and Starbucks, respectively, and ordered the firms to repay some taxes.

EU rules say some tax breaks offered to big companies breach the bloc’s rules on state aid, as they amount to a government subsidy that is aimed at attracting multinationals to do business in certain countries.

The deals are not illegal and critics say the EU has been unfairly targeting US companies. But Vestager said that in the Belgium case, €500 of the €700 million euros in avoided taxes were owed by European companies.

Belgium’s system, dubbed “Only in Belgium”, allows companies to reduce tax by registering “excess profits” that allegedly result from the advantage of being part of a multinational group.

Vestager insisted those tax breaks should be available for stand-alone companies or Belgian groups, rejecting Belgium’s claims that the system avoids “double taxation” in two or more countries.

Fair taxation activists said the decision, like the other EU moves after Luxleaks, was too cautious.

“Instead of unclear tax laws and secret sweetheart deals between governments and multinational corporations, we need clear rules that ensure everyone pays their fair share,” said Tove Maria Ryding, a tax specialist at European Network on Debt and Development (Eurodad).

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