By Tom Fairless
BRUSSELS--A high-profile European Union investigation into
alleged tax sweeteners for multinationals spread to a fourth
country on Tuesday, in a sign of the growing momentum behind the
bloc's clampdown on corporate tax avoidance.
Policy makers have been scrambling to close loopholes in
Europe's fragmented tax system that allow international groups to
sidestep billions of euros in tax at a time of tough national
austerity. Governments are hampered by a requirement that they all
agree on any changes to the bloc's tax laws. But regulators in
Brussels have stepped into the breach, opening a series of EU-wide
probes that have gathered pace since widely publicized leaks late
last year exposed the extent of tax avoidance in Luxembourg.
The EU's probes have so far ensnared four multinationals in
three European countries-- Apple Inc. in Ireland, Amazon.com Inc.
and Fiat SpA in Luxembourg and Starbucks Corp. in the Netherlands.
If regulators' suspicions are confirmed, the companies could face
back-tax demands worth hundreds of millions of dollars. All
companies have denied receiving special treatment.
EU regulators said Tuesday they had opened a formal probe into
whether Belgium gives an unfair tax break to multinational groups
that isn't available to other firms. The concerns center on a
provision in Belgian law that allows companies to deduct so-called
"excess profits" from their tax bills--profits that allegedly
result from the advantage of being part of a multinational
group.
The scheme typically offers tax discounts of more than 50% and
up to 90% for some multinational groups, apparently those "that
move a substantial part of their businesses to Belgium," Margrethe
Vestager, the EU's antitrust czar, said at a news conference.
She said the scheme appeared to overestimate the benefits of
being part of a multinational, and could constitute "a serious
distortion" of EU law. She declined to name any of the companies
involved in the probe.
Belgium's Finance Minister Johan Van Overtveldt said the
government will offer to cooperate fully in the probe and will seek
a meeting with Ms. Vestager soon to "get a clear view on the
objections and to offer clarifications where they are
required."
He also said there were no indications that Belgium falls short
of compliance with the standards of the Organization for Economic
Co-operation and Development, which shapes international norms on
taxation.
The EU's widening probe has focused on tax rulings, which are
used to confirm the size of companies' future tax bills, to give
company directors certainty as to their future outgoings.
Regulators suspect that some tax rulings may have granted certain
companies an advantage over others, which would be illegal under EU
law.
The Belgian scheme "appears to grant substantial tax reductions
only to certain multinational companies that would not be available
to stand-alone companies," Ms. Vestager said. She said she wasn't
convinced that the scheme helped companies to avoid being taxed
twice by different governments for the same profits, and that it
appeared to violate international tax norms established by the
Organization for Economic Cooperation and Development, a club of
rich countries.
Ms. Vestager, who took office as the EU's competition
commissioner in November, ratcheted up the tax investigation
significantly in December by announcing that all 28 EU governments
would be required to provide a full list of companies that had
received an advance tax ruling between 2010 and 2013.
In the wake of the EU's probes, Ireland has announced it will
phase out a tax loophole known as the double-Irish, while
Luxembourg is working on legislation to ensure its approval process
for corporate tax rulings is more transparent.
Write to Tom Fairless at tom.fairless@wsj.com
Access Investor Kit for Apple, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US0378331005
Access Investor Kit for Starbucks Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US8552441094
Subscribe to WSJ: http://online.wsj.com?mod=djnwires