Brussels demands details of tax rulings from 15 more countries

The EU sharply escalated its campaign against tax avoidance by multinationals on Monday by demanding details of specific tax rulings from 15 more countries. Brussels also took the unusually combative step of issuing injunctions against Estonia and Poland, saying that Tallinn and Warsaw risked court action from next month if they did not supply crucial tax information, which they have so far refused to divulge. Margrethe Vestager, the EU competition commissioner, has made tax justice one of her top priorities and her investigations focus on the “comfort letters” that EU countries agree with big companies to help them reduce their tax obligations. In particular, the EU is seeking to limit “transfer pricing”, the practice whereby companies buy and sell goods across borders internally to book profit in lower tax jurisdictions. The opening investigations have centred on six countries: Britain, Cyprus, Ireland, Luxembourg, Malta and the Netherlands.
The four most conspicuous cases involve deals for Apple in Ireland, Starbucks in the Netherlands and Fiat and Amazon in Luxembourg. Brussels has said that it hopes to conclude these cases shortly, raising the possibility that the countries will be ordered to recover potentially large sums from the companies. Ms Vestager said on Monday that Brussels would now also seek information on individual tax deals from 15 more member states: Austria, Belgium, the Czech Republic, Denmark, Finland, France, Germany, Hungary, Italy, Lithuania, Portugal, Romania, Slovakia, Spain and Sweden. “We want to analyse them carefully to find out whether member states employ tax rulings to grant companies selective tax advantages that breach EU state aid rules,” Ms Vestager said. “We are putting together the puzzle of tax ruling practices in the EU. Sometimes we had to ask member states twice or more to provide information. Still, there are pieces missing: to have a complete overview we also need full information from Estonia and Poland,” she added. Apple has already warned its investors that it could face a significant — or “material” — financial hit if the commission demands that Dublin recover the funds. The commission has also launched an in-depth probe into a Belgian tax scheme that allows group companies to reduce their corporation tax liability. Britain’s tax arrangements raise a thorny political problem for the commission. Tax justice campaigners accuse the UK of having some of Europe’s most generous tax arrangements for big corporations, but senior members of the commission are at pains to avoid any big showdown with Britain in the run-up to a referendum on EU membership.
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By Christian Oliver in Brussels // Photo ©Bloomberg