Brussels, 08/12/2011 (Agence Europe) - Having been subject to a lower level of business tax, France Télécom was in receipt of state aid incompatible with the common market each year from 1994 to 2002, ruled the Court of Justice of the EU on Thursday 8 December (Case C-81/10 P). Rejecting the appeal lodged by the company, the Court upheld the 2009 General Court ruling (joined Cases T-427/04 and T-17/05) which supported the European Commission decision that there had been illegal state aid and ordering its recovery (Decision of 2 August 2004).
The aid at issue relates to a special business tax regime to which the company was subject between 1 January 1994 and 31 December 2004 as it changed its legal form in the context of the liberalisation of the telecommunications sector. During this period, the company was required to pay business tax at a national rate which was lower than would have been paid under the general tax system. The Commission formed the view that these specific tax arrangements constituted state aid which it estimated to be between €798 million and €1,140 million, before interest, which the French state should recover. France Télécom appealed against the 2009 General Court ruling upholding this decision.
In its ruling, the Court said that the company's liability to business tax was in fact lower and it therefore benefited from an advantage directly attributable to the specific features of the special tax regime applied to it. The business tax paid by the company was calculated on the basis of a weighted average rate, as opposed to the various rates applicable in the different local authorities, whereas the rates to which other undertakings were subject were voted annually by those authorities. Moreover, France Télécom was subject to a single rate of business tax only in its principal place of business, whereas other undertakings were taxed at the different rates voted by the local authorities in the territory within which those undertakings had establishments. A rate of 1.9% was also applied to France Télécom, as opposed to the rate of 8% applicable to other undertakings, in respect of management costs.
The Court rejected France Télécom's argument that the General Court had failed to take account of the overall tax regime applicable to it during two successive tax regimes - a transitional scheme from 1991 to 1993 and the definitive scheme from 1994 to 2002 - and that under the first scheme it had been required to pay a fixed levy established annually by legislation which meant that it had been over-taxed. The Court decided that the two periods could be treated separately and ruled that the General Court did not err in law in finding that the Commission was entitled to refuse to apply a set-off between, on the one hand, the amount paid by France Télécom between 1991 and 1993 by way of fixed levy and, on the other, the tax differentials arising as a result of the special regime established for that company for the years 1994 to 2002. Lastly, the Court also rejected France Télécom's arguments alleging breach of the principle of the protection of legitimate expectations and failure to state adequate reasons in the judgment of the General Court. (FG/transl.rt)