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Brussels begins investigation into Belgian state aid


The European Commission has begun an in-depth investigation into a Belgian tax provision that allows companies to reduce their tax liability on the basis of the 'excess profits' that are said to result from being part of a multinational group.

The Commission doubts whether the tax provision complies with EU state aid rules, which prohibit selective advantages that distort competition in the single market, it said in a statement.

Commissioner Margrethe Vestager, who is in charge of competition policy, said: "The Belgian 'excess profit' tax system appears to grant substantial tax reductions only to certain multinational companies that would not be available to stand-alone companies. If our concerns are confirmed, this generalised scheme would be a serious distortion of competition unduly benefitting a selected number of multinationals. As part of our efforts to ensure that all companies pay their fair share of tax, we have to investigate this further."

This is the latest of several investigations by the European Commission into tax rulings. In December 2014, the Commission warned that it was extending an investigation into tax rulings provided by certain EU member states to cover all member states. The Commission said at the time that it would now ask all member states to provide information about their tax ruling practices. Countries would be asked to confirm whether they provide tax rulings and, if they do, to provide a list of all companies that have received a tax ruling from 2010 to 2013.

The latest investigation is broader than previous ones which have involved companies including Starbucks, Apple and Amazon; looking at the whole system in Belgium, rather than rulings given to individual companies.

Tax expert Stuart Walsh of Pinsent Masons, the law firm behind Out-Law.com, said: "The increasing focus on tax and state aid means that companies need to risk assess their tax planning from a new perspective. Existing rulings may be less robust than previously thought, and new structures should be assessed for state aid as well as tax risk," he said.

The Belgian investigation is part of a "global crackdown" on tax avoidance, Walsh said. "The US isn't a fan of aggressive tax planning, either – Obama is talking about a potential 14% tax on foreign-accrued profit. Companies really need to start thinking about their tax structures."

State aid expert Caroline Ramsay, also of Pinsent Masons, said that this demonstrates the commitment of the European Commission to further explore tax regimes: "It shows that the state aid problem is not going to go away". 

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