Vestager Says EU Must Take Action Against Unrealistic Tax Deals

  • Competition chief Vestager comments on tax rulings in speech
  • EU is investigating fiscal pacts for Apple,

European Union Competition Commissioner Margrethe Vestager justified probes into favorable tax deals given to companies like Apple Inc. and Inc., saying that regulators have to act when countries hand out “unrealistic” pacts.

Vestager, who has already ordered Starbucks Corp. and Fiat Chrysler Automobiles NV, to repay about 30 million euros ($33 million) each in back taxes, said Friday in Brussels that her job wasn’t to “reassess the work of national tax authorities.”

“Tax rulings which reflect economic reality and actually make sense are not an issue for us,” Vestager said in the text of a speech distributed by her office. “But we have seen some examples of unrealistic transfer prices, without any sign that the authorities had a convincing reason to accept them.”

Three years ago, the EU antitrust watchdog embarked on a crusade to rein in governments that woo big companies with special deals, usually known as tax rulings, allowing them to reduce their fiscal liability by booking profits abroad. Amazon’s deal with Luxembourg is seen as next in the firing line after the regulator issued three decisions demanding national authorities seek the return of back taxes in other cases.

The commission has “looked at more than a thousand tax rulings, to see if they gave special treatment to the companies that received them,” Vestager said Friday.

When there is a chance of state aid being involved in such deals, “the commission does have to act,” she said.

Luxembourg and the Netherlands are appealing the EU’s decisions last October concerning state aid in tax pacts for the Fiat unit in Luxembourg and Starbucks Corp. in the Netherlands. Belgium is also appealing the commission’s January order that it gave favorable tax deals to 35 companies and has to reclaim about 700 million euros in back payments.

Not all tax rulings are bad and “the vast majority of them don’t give us any concern at all,” she said. “But our investigations show that tax rulings are also sometimes used in other ways: to grant individual companies a benefit that’s not available to others.”

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