Vestager denies delay in probing Ireland’s Apple tax deal

European Competition Commissioner Margrethe Vestager has denied any delay in the European Commission's ongoing investigation into Ireland's tax arrangement with Apple, as the commission announced the latest outcome of a state aid investigation into the tax regimes of member states.

Belgium became the latest country to fall foul of EU competition rules on Monday, with the European Commission ordering the Belgian authorities to recoup €700 million in unpaid corporate taxes from at least 35 companies who benefitted from tax rulings offered by the Belgian government.

Speaking in Brussels this lunchtime, commissioner Vestager said the commission would take a decision on the ongoing investigations into Ireland and Luxembourg “if and when they are ready.”

Asked if the investigation into Ireland’s tax rulings with Apple had run into difficulty given her comments and the request for further information from the Irish authorities before Christmas, the commissioner said that the investigation was taking longer than had been envisaged.

Time

“The investigation takes time,” she said. “Sometimes you think that a case is just on track and you can forsee a decision within a foreseeable amount of time, and then something happens. Maybe more information has been given to you and you have to assess that. Maybe you yourself have to ask more questions.”

She said it was vital to ensure that there was sufficient quality in the case work involved in the investigation.

“We will announce the decision when they are ready and we cannot say anything about the timing of that.”

The European Commission announced a probe into two tax rulings offered by the Irish authorities to Apple more than 18 months ago. While in October the commission ruled that tax rulings offered by the Netherlands to Starbucks, and to Fiat by the Luxembourg authorities were in breach of state aid rules, it has yet to rule on Ireland's tax deal with Apple and Luxembourg's arrangement with Amazon.

The decision to order Belgium to recoup €700 million in unpaid corporate tax from businesses will be closely watched by the Irish government, which could face a similar obligation to recover unpaid corporate tax from Apple. In October the Commission ordered the Netherlands and Luxembourg to recover between €20 and €30 million from Starbucks and Fiat respectively.

Law

Under state aid law, countries can be forced by the commission to recoup unpaid corporate tax stretching back over a period of 10 years.

The investigation into Belgium’s tax arrangements focused on a specific quirk of the Belgian tax system in existence since 2005 which allow multinationals to reduce their tax bill by exempting certain profits that derive from activities such as research and development and economies of scale due to their multi-national status.

The European Commission’s state aid arm opened the investigation due to concerns that these benefits were applicable to multinational companies and not stand-alone companies, a situation that it found to be anti-competitive.

Announcing the result of the Belgian investigation, commissioner Vestager said that Belgium’s “excess profit” scheme “goes against state aid rules.” “National tax authorities cannot give any company, however large, however powerful, an unfair competitive advantage compared to others.”

It now fell to the Belgian authorities to recoup the money, she said.

“In reality this scheme gives a carte blanche to double non-taxation... In essence the scheme allowed companies to pay substantially less tax simply because they are multinationals and to benefit from alleged symmetries. The scheme in our eyes is illegal.”

Tax

While declining to name the companies who benefitted from the tax scheme, Commissioner Vestager said that €500 million of the total tax bill of €700 million related to European companies, a development that may appease critics of the European Commission who have accused Brussels of unfairly targeting US multinationals. Commissioner Vestager said that the Belgian ruling showed that the Commission was not unfairly targeting certain countries or sectors.

“We do not target companies for whatever nationality or ownership they might have. What we’re interested in is fair competition. This is why we use the state aid tool to look for unfair competition because these schemes are twisting the level playing-field.”