By Tom Fairless
BRUSSELS--European Union regulators ordered France to recover
EUR1.37 billion ($1.5 billion) in state funds from Electricite de
France SA after concluding the French electricity supplier had
benefited from illegal tax breaks.
The decision comes amid a broader EU crackdown on alleged tax
avoidance by major companies that has already embroiled Apple Inc.,
Amazon.com Inc. and Starbucks Corp . The issue is a priority for
policy makers in Brussels, as governments across the region seek to
shore up crisis-hit public finances and convince taxpayers that the
wealthiest companies are paying their fair share of taxes.
In a statement Wednesday, the European Commission, the bloc's
top antitrust authority, said France had failed to charge EDF all
the corporation tax it owed in 1997. The French state is the
majority shareholder of EDF, holding 85% of its capital.
That tax break gave EDF "an undue economic advantage compared
with other operators on the market and so distorted competition,"
the commission said.
"Whether private or public, large or small, any undertaking
operating in the [EU's] single market must pay its fair share of
corporation tax," EU antitrust chief Margrethe Vestager said in a
statement.
The Paris-based company said it would pay the French government
as ordered by the EU, but would also lodge an appeal with the EU
courts.
"EDF denies the existence of unlawful state aid," the company
said in a statement. It said it would book losses associated to the
payment on its first-half earnings next Thursday and in the
second-half data in six months.
It is the second time that EU regulators have ruled on the EDF
case, after their initial decision in 2003 was annulled by the
bloc's appeals courts in Luxembourg.
At issue are a series of provisions in EDF's accounts that were
made between 1987 and 1996, aimed at providing for a renewal of the
company's network. When EDF's balance sheet was restructured in
1997, French authorities "reclassified some of these provisions as
a capital injection without levying corporation tax," the
commission said.
The EU started investigating the case more than a decade ago. It
ruled in 2003 that EDF should repay the funds, but the decision was
overturned by the courts in Luxembourg, which said the commission
hadn't checked whether a private investor would have acted in a
similar way to the French government.
To address those concerns, the EU reopened its investigation in
2013. It concluded that the aid wasn't justified from the viewpoint
of a private investor "because at the time the profitability that
could reasonably be expected of such an investment was too low,"
the commission said Wednesday.
Ms. Vestager's agency has been leading the bloc's crackdown on
tax avoidance, using its powers to police so-called state-aid rules
that prohibit governments from providing support to some companies
and not others.
In May, Ms. Vestager delayed decisions on whether Apple, Amazon,
Fiat SpA and Starbucks may have benefited from illegal tax breaks.
The decisions, which had been expected by June, could be
accompanied by demands for sizable back-tax payments.
Inti Landauro in Paris contributed to this article
Write to Tom Fairless at tom.fairless@wsj.com
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