Vestager’s war on tax breaks causes sparks in EU courts

MLex Market Insight

News

4.9 • 9 Ratings

🗓️ 12 July 2018

⏱️ 15 minutes

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Summary

EU competition enforcers have caused controversy by using state aid rules to challenge tax breaks given by certain EU governments to multinational companies. Subsequent court cases have seen heated arguments between lawyers for the European Commission and the companies involved — often supported by national governments. Competition reporters Matthew Newman and Nicholas Hirst explain what’s going on to Brussels news editor Sam Wilkin.

Transcript

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0:00.0	Hello and welcome to another MLEX podcast. I'm Sam Wilkin, Brussels news editor, and today we're going to talk about the EU's campaign against corporate tax breaks.
0:15.9	Margreta Vestayor's Competition Department has levied big fines by saying that these tax breaks amount to illegal
0:21.7	state aid. But many companies and national governments are fighting her in the EU courts. So where
0:27.1	are we going to end up? Here to discuss that with me are two of our senior competition reporters
0:32.0	in Brussels, Matthew and Nicholas Hurst. Hello, Matthew and Nicholas. Hi, Sam. Hello, Sam.
0:37.2	Matthew, start us off. Why is the Commission going after multinationals on the tax breaks?
0:43.1	Well, this all started because of public pressure about tax breaks from multinationals.
0:49.1	Essentially, the Commission was responding to this outcry that technology companies in particular were
0:56.7	paying very, very little tax in the EU despite making billions of dollars and euros in revenues.
1:04.5	And so what the Commission did is they set up a special task force in 2013 and they really
1:10.5	began to go over the details of what are called
1:14.1	these tax rulings. And tax rulings are basically comfort letters. So comfort letters are when
1:20.1	companies ask a tax authority to approve their interpretation of the tax rules. This all really
1:26.6	kicked off in earnest in 2014 with the publication of the tax rules. This all really kicked off in earnest in 2014 with the
1:31.0	publication in Luke's Leaks. You may remember this is when a consortium of journalists uncovered
1:36.9	massive tax avoidance by some of the best known companies in the world. And soon after, the commission did have some notable successes.
1:47.4	So they started off with Starbucks, a tax break in the Netherlands, and also with a branch of fiat in
1:55.5	Luxembourg. How are they justifying this in terms of competition and antitrust? Is this really
2:00.4	the right department to be
2:01.8	going after it? See, this is where things get to be a bit controversial. So under the EU state aid
2:08.3	rules, companies cannot receive any kind of benefits that would not be available to other
2:15.0	companies. That's just a plain old illegal subsidy. When it comes to tax,
	...

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