Around 35 multinationals including brewer Anheuser-Busch InBev NV will be required to pay around €700 million ($764.50 million) in additional taxes in Belgium after European Union regulators ruled they had benefited from an illegal tax break.
The decision by the European Commission, the bloc’s top antitrust regulator, is the latest step in a high-profile inquiry into alleged unfair tax deals that has already ensnared at least four U.S. multinationals, including Apple Inc., Amazon.com Inc., McDonald’s Corp. and Starbucks Corp.
It comes at a sensitive time for Belgium-based AB InBev, which is in the middle of a complicated $108 billion deal to buy the world’s second-largest brewer, SAB Miller PLC of London.
Other multinationals that now face back-tax demands in Belgium include BP PLC, German chemicals giant BASF SE and Pfizer Corp., said a person familiar with the case.
The commission said Monday that a Belgian tax-discount plan available only to certain multinational groups “represents a very serious distortion of competition within the EU’s single market,” and ordered Belgium to recover the unpaid taxes.
At a news conference, EU antitrust chief Margethe Vestager said the scheme had given “carte blanche to double non-taxation” of certain multinationals in Belgium. She declined to name the companies affected.
But a person familiar with the matter said the largest beneficiaries of the Belgian scheme—and therefore those likely to face the biggest back-tax demands—were AB InBev, Swedish industrial company Atlas Copco, BP, BASF, Belgian telecom operator Belgacom, now known as Proximus Group, French retailer Celio and vehicle-component manufacturer Wabco.
AB InBev confirmed in a statement that it benefits from the type of Belgian tax ruling that was judged illegal by regulators in Brussels.
The company said it was disappointed by the EU’s decision and was confident that its tax rulings are in full compliance with EU law, and that it has always complied with Belgian and international tax provisions.
“We will consider our options, taking into account the reactions by the Belgian authorities,” the company said—leaving the door open to an appeal with the EU’s top courts in Luxembourg.
The other companies didn’t immediately respond to requests for comment.
Belgian Finance Minister Johan Van Overtveldt warned that the EU’s decision, if implemented, would have considerable consequences for the companies concerned, and that the reimbursement itself would be particularly complex. The tax scheme has been in place since 2005.
Belgian authorities will hold further negotiations with EU regulators, and the government doesn’t rule out lodging an appeal with the bloc’s top courts in Luxembourg, depending on the outcome of the talks, Mr. Van Overtveldt said.
Tax experts said multinationals might reconsider basing themselves in Belgium as a result of the EU’s ruling. Companies might look instead at London, the Netherlands or Luxembourg, which have lower headline corporate tax rates than Belgium’s 34%, said Geert De Neef, a Brussels-based partner with international tax consultancy Taxand.
“Then you don’t need special tricks, you know it is acceptable for the European Commission,” Mr. De Neef said.
The EU’s widening tax inquiry has also drawn criticism from the U.S. government over its apparent disproportionate targeting of American companies, which have been targeted with four separate probes.
Responding directly to such criticism on Monday, Ms. Vestager said the latest ruling would affect mainly European multinationals. Of the €700 million in back taxes to be repaid, €500 million would come from European companies, she said.
“I of course hear the criticism that this is about U.S. companies, which it is obviously not,” Ms. Vestager said. “What we are interested in is fair competition.”
The latest case centers on a provision in Belgian law that allows companies to deduct so-called excess profits from their tax bills—profits that allegedly result from the advantage of being part of a multinational group.
EU regulators argue that the scheme allowed multinationals to avoid paying tax on those profits anywhere in the world, and reduced the corporate tax base of the affected companies by between 50% and 90%.
The multinationals that benefited are from a large variety of sectors, but are generally involved in producing goods, Ms. Vestager said.
The tax probes are a top political priority for European policy makers, who are under pressure to show that the biggest companies are paying their fair share during an age of austerity. But tax experts complain that the inquiry may have repercussions for investment in Europe because it risks overturning thousands of long-established corporate tax structures.
EU regulators have so far closed two probes, into Starbucks’s tax affairs in the Netherlands and Fiat Chrysler Automobiles NV’s in Luxembourg. The EU ruled in October that both companies had benefited from illegal tax deals and ordered the governments to reclaim between €20 million and €30 million from each company. Both decisions are expected to be appealed at the EU’s courts in Luxembourg, a process that can take years.
All of the governments involved have denied giving special treatment, and the companies have denied receiving it.
(Published by The Wall Street Journal - January 11, 2016)