Brussels, 03/02/2015 (Agence Europe) - On Tuesday 3 February, the European Commission opened a fifth in-depth investigation into the tax ruling practices of member states, with Belgium in the hot seat this time. What is different about this case is that it is not a tax decision in respect of a specific company under fire, but the Belgian system of early tax decisions regarding excess profits itself, unlike the four earlier investigations launched against Luxembourg (Amazon, Fiat), Ireland (Apple) and the Netherlands (Starbucks).
This system, which was set in place in 2004, allows multinational companies established in Belgium to reduce the corporate tax they must pay on their excess profits that “allegedly” result from the advantage of being part of a multinational group.
At this stage, the Commission has two misgivings. Firstly, the regime appears to benefit only multinational groups - several dozen of them - whereas Belgian companies operating only in Belgium cannot claim similar advantages.
Secondly, the Commission is not entirely convinced by Belgium's interpretation of the general principle of full competition of the OECD. It has concerns that the excess profits in question constitute a considerable over-estimation of the real advantages procured by belonging to a multinational group. As the Commissioner for Competition, Margrethe Vestager, stresses, the tax deductions granted in the framework of this regime generally exceed 50% and, in some cases, 90% of the profits covered by the tax ruling.
Nor is the Commissioner convinced that the system can be justified “by the objective to prevent double taxation”. “We have not seen any evidence that any other country” has announced its intention to tax the same profits, she said. Lastly, the Commission notes that the system appears to constitute an incentive for multinationals to move a considerable proportion of their activities to Belgium.
The Commission was never notified of this regime and it would appear that the Code of Conduct Group (corporate taxation) was not informed of it either. The European institution became aware of the regime after seeing a reference to it in the press.
As of Tuesday afternoon, the Belgian government had not commented on the Commission's announcement.
Other investigations could follow, the Commission warned, referring to the volume of information which has come to light with the LuxLeaks scandal. Vestager stressed that tax rulings in themselves were not in question. However, if they are used to create a tax haven, “it's an entirely different matter”, she said.
In December, the Commission extended its request for information on tax rulings to all EU member states. “They have been either cooperative, or extremely cooperative”, said Vestager.
The Commissioner reiterated that the aim is not to bring in a harmonised tax policy through the back door, expressing her support for any initiative by her colleague Pierre Moscovici to this end. The combination of the Commission's powers of prevention and of control should serve as a warning to those who feel that aggressive tax planning is a way of life, Vestager concluded. (EL)