World Economy

EU Warns of Illegal Tax Deals

EU Warns of Illegal Tax DealsEU Warns of Illegal Tax Deals

European Union lawmakers said governments that give multibillion-euro tax subsidies to big companies shouldn’t get to pocket the money themselves if regulators order them to claw back illegal state aid.

Nations such as Ireland–which Bloomberg Intelligence says may eventually be forced to recoup billions of euros in unpaid taxes from Apple Inc.–should in the future be forced to hand over the proceeds to the EU’s budget or to neighboring states that play by the rules, according to a report backed by the European Parliament on Tuesday in Strasbourg, France.

“Countries that play unfair tricks must not profit twice,” said the report’s author, Werner Langen, a member of the European People’s Party, the parliament’s biggest group, and an ally of German Chancellor Angela Merkel. EU law currently obliges nations to demand a repayment of illegal subsidies and allows them to spend the funds however they wish.

While Ireland denies it broke EU state aid rules and is still awaiting a decision from the European Commission on its dealings with the iPhone maker, regulators have already ordered the Netherlands and Luxembourg to claim back unpaid taxes from coffee giant Starbucks Corp. and a unit of Fiat Chrysler Automobiles NV.

The European Union last week ordered Belgium to recover about €700 million ($762 million) in illegal tax breaks given to at least 35 companies, including Anheuser-Busch InBev NVand BP Plc, as regulators continued a crackdown on overly generous tax schemes throughout the 28-nation bloc.

 Hit List

The commission, which polices fair competition in the 28-nation EU, last month added McDonald’s to its tax hit list, saying the company may have unfairly exploited a pact with Luxembourg to avoid tax for more than half a decade.

Apple, McDonald’s and the other companies involved all say they acted within the rules. The commission, which is also in charge of proposing changes to the EU laws, said it’s move is based on “long-standing jurisprudence” of the EU courts.

“If competition is distorted, the logical consequence is that the situation needs to be restored to the condition before the aid was granted. Recovery is the legal tool for this,” said Ricardo Cardoso, a spokesman for the Brussels-based commission. “The amount of aid unduly granted to a company must be returned to the member state that gave it. Any change to this principle would require an amendment of the EU treaties that would have to be ratified by all” member nations.