Belgian Tax Breaks for Multinational Companies Probed by EU

(Bloomberg) — The European Union is investigating Belgium’s tax deals with multinational corporations, potentially dragging dozens more companies into widening probes of sweetheart fiscal pacts handed out by national governments.

Building on investigations of Apple Inc. in Ireland and Amazon.com Inc. in Luxembourg, the European Commission is targeting Belgium’s so-called excess-profit rulings. Companies operating cross-border could get deductions on half of the profits covered by the Belgian pacts and in some cases, as much as 90 percent, the regulator said in a statement.

“This is a scheme for multinationals, not only American multinationals,” EU Competition Commissioner Margrethe Vestager told reporters at a press conference. “It’s not for standalone businesses and it’s not for Belgian groups.”

The inquiry comes amid a global crackdown on corporate tax-avoidance as governments struggle to increase revenue and reduce deficits. The EU is also investigating accords for Starbucks Corp. in the Netherlands as well as Fiat Finance & Trade in Luxembourg. The commission has said tax avoidance and evasion in the EU cost about 1 trillion euros ($1.13 trillion) a year.

“It appear that the deals are only struck with companies that move substantial parts of their businesses to Belgium,” Vestager said.

60 Rulings

Belgium has granted about 60 excess-profit rulings, Belgian Finance Minister Johan Van Overtveldt told the country’s federal parliament in December. While he is ready to share data with other EU nations about its estimated 5,000 tax rulings, he won’t disclose excess profit cases because they contain sensitive information about commercial strategy, he said.

“We have at this moment no indication that the excess-profit rulings don’t comply” with international tax rules, Van Overtveldt said in a statement today. He said he will “quickly” organize a meeting with EU officials and will cooperate with the investigation.

The Belgian fiscal authorities allow multinational companies to deduct profits from their taxes due to supposed intra-group synergies and economies of scale, the commission said.

“It seems to us that the tax rulings overestimate the benefits of belonging to a multinational group,” Vestager said. She declined to name companies that may have benefited from the Belgian tax breaks.

Double Taxation

Vestager said she was unconvinced by Belgium’s argument that the excess-profit deductions are justified to avoid double taxation of multinationals.

“So far we have not seen any evidence that the Belgian tax authorities approved the deductions because another EU country has made a corresponding tax claim,” Vestager said.

This lack of tax in Belgium or other jurisdictions is problematic, said Marco Van Hees, a Belgian communist lawmaker.

“Taxes are reduced on one side without any taxation on the other side,” he said in an interview.

The commission said it considers the Belgian framework selective and may amount to an illegal subsidy. Governments can be ordered by the EU regulator to claw back unfair aid that skews competition, including grants and tax breaks.

Anheuser-Busch InBev NV said last year that Belgian tax inspectors are seeking to investigate a unit of the world’s biggest brewer. De Tijd newspaper reported that a tax agreement allowed AB InBev to transfer 140 million euros of profit from around the world over three years to a Belgian company that exists only on paper.

“We saw the excess-profit tax scheme mentioned in the news and we took the lead from there,” Vestager said. “And here we are with an open investigation.”

The press office for Leuven, Belgium-based Anheuser-Busch InBev didn’t immediately respond to a call and e-mail seeking comment.