Tax Probes May Face Legal Battle: EU’s Competition Chief
The European Union’s new antitrust chief said the EU is braced for a legal battle with governments embroiled in its probe of sweetheart tax deals for multinationals from Apple Inc. (AAPL:US) to Amazon.com Inc.
Margrethe Vestager said the process needs to be legally watertight as officials investigate whether deals handed out to companies by Ireland, Luxembourg and the Netherlands were a form of illegal state subsidy.
Governments would like to challenge the EU and “of course the case work has to be very very thorough,” she told reporters in Brussels today.
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Vestager, the EU’s competition commissioner since Nov. 1, inherited probes into Irish tax deals with Apple, Luxembourg’s taxation of Amazon and Fiat Finance & Trade and Netherlands’ treatment of Starbucks Corp. Irish Finance Minister Michael Noonan said last month that the EU case isn’t strong and he thought it would be dropped. Luxembourg is already challenging regulators’ demand for taxation documents in EU courts.
Vestager said she would also examine information on companies’ secret deals with Luxembourg published by a group of investigative journalists.
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The Grand Duchy last week charged a Frenchman with stealing confidential documents on taxation arranged for multinational companies by PricewaterhouseCoopers LLP.
Selective Ruling
While the documents show that Luxembourg issued tax rulings to hundreds of companies “it’s not only a question of whether anyone could get a tax ruling or not, it’s a question of whether it’s selective” and “some companies could have something that other companies couldn’t,” she said.
EU regulators are focused on “getting insight on a much more thorough and detailed level” about how the tax rulings were used and what mechanisms were deployed by companies to exploit them, she said.
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Vestager said the probes were already having an impact and that “it’s not the number of cases that’s important, it’s the change in behavior.”
“It is important that Ireland has decided to do away with this double Irish” tax break and that Luxembourg has proposed “changing how they do tax rulings,” she said. “We need the transparency when it comes to the automatic exchange of tax rulings and we need the common consolidated corporate tax base” to agree on how much of a company’s income can be taxed.
Efforts to overhaul EU fiscal legislation are usually thwarted by the bloc’s voting rules, which require unanimous approval for tax-related laws.
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“We have a very, very rare moment” in Europe where “all of a sudden in most member countries there is a debate about corporate taxation” as people question tax practices by companies they know well and ask their governments what they are doing on the issue, she said.
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