Taxation Aid to Companies Examined by EU’s Competition Arm

The European Union is quizzing Ireland, Luxembourg and the Netherlands on the legality of their tax deals with certain companies amid a global crackdown on tax avoidance.

The European Commission’s competition arm is seeking information on whether selective advantages were granted, Antoine Colombani, spokesman for EU Competition Commissioner Joaquin Almunia, said today. It’s too early to say whether formal state aid investigations will be opened, he said.

With European governments struggling to increase revenue and reduce deficits, company taxes have come under intense scrutiny. The Group of 20 nations last week endorsed the Organization for Economic Cooperation and Development’s blueprint for cracking down on tax-avoiding strategies used by companies such as Google Inc., Apple Inc. and Yahoo! Inc. The U.K. Parliament has held three hearings since November on corporate tax dodging -- examining strategies used by Google, Inc. and Starbucks Corp.

“What the request for information shows is that we are ready to use all tools at our disposal in our fight against tax avoidance, corporate tax avoidance in particular,” Emer Traynor, a spokeswoman for EU Tax Commissioner Algirdas Semeta, told reporters in Brussels.

Closer Look

The commission decided to take a closer look at tax deals with certain companies following debates in national parliaments and articles in the press, Colombani said.

“These agreements are not always transparent so we are asking for more information,” Colombani said. The requests were sent in June and July and the commission has already received some responses, he said.

Most government support, including specific tax breaks, that enable companies to gain an unfair advantage over competitors is illegal under EU rules.

Jean-Claude Juncker, Luxembourg’s Prime Minister, said the information request “doesn’t particularly worry” him. “There won’t be a probe,” he said today at a press conference.

The Dutch Finance Ministry declined to comment on the information-gathering exercise.

“Ireland does not do special tax rate deals with companies,” the Irish Finance Ministry said in an e-mail. “The essence of state aid is about aiding a particular sector or type of investor –- the Irish rules do not do that.”

“Ireland, like all member states, from time to time receives queries from the commission on a variety of issues, including tax, and we always cooperate fully with such requests for information,” the Irish Finance Ministry said.

The Financial Times reported on the EU’s information-gathering exercise earlier today, saying that Apple and Starbucks were among the companies mentioned in the request for details sent by the commission.

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