Brussels, 29/02/2016 (Agence Europe) - On Monday 29 February, the Commissioner with responsibility for Competition, Margrethe Vestager, responded to the letter from the American Secretary of the Treasury, Jack Lew, regarding investigations into potential State aid granted to companies through tax advantages. Readers may recall that in his letter, Jack Lew argued that these investigations created “worrying international fiscal precedents” and appeared to be targeting American businesses without sufficient justification.
“State aid rules have been in place almost since the beginning of the European Union, because they are a fundamental necessity to protect the EU's Single Market against (the possibility of) a member state engaging in a harmful subsidy race or using public funds to enable selected companies to unfairly outcompete their rivals”, Vestager's letter reads. “The rules apply to all companies operating on the EU's Single Market, large or small, irrespective of whether they are European companies or originate from outside the EU”, it continues. The Commission explains that every year, the Commission adopts around 500 decisions on State aid measures and that each case is assessed on its own merit and in full respect of a legal procedure. “Since 1999, the Commission has adopted around 170 decisions ordering recovery of a legal State aid from individual companies and only a handful concerned US companies”, the Commissioner stressed.
Explaining that State aid control is clearly specific to the EU, the Commissioner voices her hopes that Lew would agree that if a national tax authority gives certain companies a more advantageous tax treatment than other undertakings operating in the same country, this can cause competition distortions. “I also hope we agree that the taxation systems of EU member states entitle them to tax the profits generated by companies operating in their territory, including US companies (…). This does not put into question the US taxation system or go against double taxation treaties concluded by EU member states”, she adds.
Finally, she explains that the price of intra-group transactions must reflect market conditions and that these transactions cannot be based on transfer prices with no economic justification. The Commissioner concludes by stressing that the rules on State aid do not aim to penalise companies, but to restore equal treatment between them and other companies. (Original version in French by Elodie Lamer)