European Union accuses Belgium of granting illegal tax breaks

EU competition commissioner Margrethe Vestager said the tax advantage given to a select group of mainly European companies “distorts competition” by putting smaller competitors “on an unequal footing”.

The European Commission ordered Belgium on Monday to recover 700 million euros ($763 mln) from 35 large companies in back taxes in the EU executive’s biggest move yet to crack down on tax avoidance by multinationals.

The Belgian fiscal authorities allowed multinational companies to deduct profits from their taxes due to supposed intra-group synergies and economies of scale, the commission said.

She did not name the companies but reports said targets included Stella Artois brewer AB InBev which is undergoing an $121-billion buyout of rival SABMiller.

AB InBev didn’t immediately respond to a request for comment.

The Commission, which rules on competition issues in the European Union, has faced accusations of a bias in its investigations against non-EU companies, notably US tech giants, as it investigates tax practices across the EU.

However, the investigation is part of a broader inquiry into various tax breaks offered by European companies, including those received by Apple in Ireland and Amazon in Luxembourg.

However, EU regulators argue that it allowed multinationals to avoid paying tax on those profits anywhere in the world.

The scheme reduced the corporate tax base of the companies by between 50% and 90% to discount for so-called “excess profits” that allegedly result from being part of a multinational group, the commission said. The EU regulator said it wasn’t convinced by Belgium’s argument that the advantage could be justified to prevent double taxation as no corresponding tax claim was made by another country. But tax experts complain that the probes may have repercussions for investment in Europe because they risk overturning thousands of long-established corporate tax structures.

The ruling is the first high-profile sweep of European, rather than United States companies, and comes after the EU ruled against similar tax deals for Starbucks (Swiss: SBUX.SW – news) and Fiat (Hanover: FIA1.HA – news) in the Netherlands and Luxembourg. None of the companies involved were identified.