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Incoming antitrust head promises action on tax deals
October, 03rd 2014

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Europe’s incoming antitrust chief has promised a tough line on state-subsidised tax avoidance, saying she will “send a signal” with the speedy conclusion of probes into deals with the likes of Apple, Fiat and Starbucks.

At her European parliament confirmation hearing to become EU competition commissioner, Margrethe Vestager described the landmark state-aid cases as “a high priority” that would help ensure companies big and small paid their taxes in full. Her comments will give added impetus to the ambitious European Commission drive to use rules against state support for companies to crack down on sweetheart deals that artificially lower tax bills for multinationals.
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The commission has already confronted Ireland over its tax deal with Apple, the Netherlands over its arrangements with Starbucks, and Luxembourg for offering what it believes are favourable terms to Fiat.

If proven, the in-depth investigations could in total lead to billions of euros of unpaid taxes being recouped, according to people familiar with the cases. But complex state aid investigations have in the past dragged on for many years. All the countries and companies subject to the investigation deny any wrongdoing.

“People are offended by some of the things that they see and read because they appreciate when people pay the tax that they are supposed to pay,” Ms Vestager said, adding she hoped the conclusion of the cases was prompt “not only to deal with the matter but to send a signal”.

Her focus on tax issues came during an assured three-hour hearing on competition policy before the parliament, where she promised to approach her job with impartiality, rigour and steely independence.

In response to several questions on the commission’s case against Google, Ms Vestager gave little away apart from to say she wanted to take steps to bring the four-year probe into the search engine a conclusion.

This contrasted with a much more forthright approach to tax issues and state-supported avoidance, which she described as a “very, very serious issue”.

As well as pointing to potential problems with tax rulings – where countries clarify tax laws for individual countries – Ms Vestager also highlighted her concern with tax structures that favour big companies.

In response to a question, she described the measure known as the Double Irish, which allows foreign companies including Google and Facebook to reduce their effective overall tax rates well below Ireland’s official 12.5 per cent corporate tax rate, as “a very unfortunate arrangement”.

Critics see the probes as a means to meddle in tax regimes over which the EU has no authority. Ms Vestager insisted she had no interest in changing tax policy “through the back door”.

“Large companies should not be allowed to organise themselves in way that allows them to pay much less tax than other companies,” she added to journalists at the end of her hearing. “We will pursue the investigations, make sure they are substantial, and hopefully win the cases.”

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