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EU threatens Poland and Estonia on tax rulings

Vestager demands information on tax deals for multinational firms as part of Commission crackdown.

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The European Commission has escalated its state aid probe into national tax policies, invoking a rare legal provision to try to force Poland and Estonia to cooperate with the inquiry.

Margrethe Vestager, the European commissioner for competition, issued an injunction Monday ordering the two member states to submit information about existing tax deals that they have struck with multinationals.

“They have only submitted general information but refused to provide a specific and detailed overview of tax rulings issued from 2010 to 2013,” the commissioner said in a statement.

Fifteen member states which did respond to Vestager’s original request, including France, Germany, Italy and Spain, have now been hit with a second round of questions, asking them to provide copies of specific tax deals mentioned in their initial responses.

Poland and Estonia, the only two member states which have yet to satisfy Vestager’s request for information issued to all EU member states, both insisted that they had provided detailed responses.

Poland’s finance ministry specified in a statement that Warsaw had sent Vestager some 700 “corporate tax interpretations” which had a cross-border element. The Estonian government said in a statement that some information was protected by Estonian laws on business confidentiality and added that Estonia did not issue tax rulings that gave companies selective benefits.

The Commission last year launched probes into tax deals agreed between Ireland and Apple, the Netherlands and Starbucks and between Luxembourg and Fiat Finance and Trade and Amazon. The Commission suspects that the member states have granted the multinationals generous tax deals in order to lure them away from other European Union member states.

The Commission’s work in the field of tax gained extra momentum in November with the leaking of hundreds of tax deals struck by Luxembourg, which were brought to public attention by the International Consortium of Investigative Journalists.

All those deals were struck during Jean-Claude Juncker’s 19 years as prime minister of Luxembourg, which raised questions about his suitability to become president of the European Commission.

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In response, he has since made it a priority for the Commission to shed light on the murky world of tax deals between member states and corporations.

In March he proposed requiring member states to automatically exchange information about such tax deals among themselves. That proposal is currently being discussed by member states in the council on economic and financial affairs. Juncker’s Commission has also promised to renew efforts to harmonize aspects of corporate taxation across Europe.

In parallel, Vestager has considerably expanded the existing probe into the tax deals obtained by Apple, Starbucks, Fiat Finance and Trade and Amazon, announcing in December 2014 that she would collect information from all member states about their tax rulings.

Monday’s injunction was unlikely to come as a surprise to Poland or Estonia. In May, Vestager expressed her frustration that some member states were refusing to reply to the Commission’s requests for information.

The Commission could ask an EU court to fine the two countries to if they ignore the injunction.

Vestager also acknowledged in April that the probes into the four tax deals were taking longer than initially expected and that her services would not reach a final conclusion by the target date of July 2015.

In a foreword to the European Commission’s Annual Competition Report published last week, Vestager said she now expected to finish those probes “shortly.”

 

Authors:
Nicholas Hirst