EU examining tax deals between Luxembourg and Engie

European Correspondent

The European Commission has opened a fresh investigation into tax deals offered by Luxembourg, this time to French energy company Engie, as EU Commissioner Margrethe Vestager defended the Apple tax ruling during a visit to Washington.

The opening of a new state-aid investigation comes three weeks after the commission ruled that Ireland had provided €13 billion worth of illegal tax subsidies to technology giant Apple.

The new Luxembourg investigation concerns a number of tax rulings offered by Luxembourg to four companies owned by French company GDF Suez, which has since become Engie.

The commission argues that the tax treatment of two financial transactions allowed the company to deal with the transactions as both equity and debt, effectively giving rise to double non-taxation.

The commissioner said the arrangement appeared to allow GDF-Suez to pay less tax than other companies.

“Financial transactions can be taxed differently depending on the type of transaction, equity or debt – but a single company cannot have the best of two worlds for one and the same transaction,” she said.

The decision to open a competition investigation into the activities of an EU company is likely to be used by Brussels to assuage concerns that it is unfairly targeting US companies, an accusation previously made by US treasury secretary Jack Lew.

Transatlantic tensions

The announcement comes as the Danish commissioner visits Washington amid continuing transatlantic tensions over the Apple judgment.

Speaking in Washington on Monday, the commissioner defended the commission’s adverse finding against Ireland.

While the European Union has a lot in common with the Federal Trade Commission, she said the US jurisdiction is "not always the same as the European jurisdiction." Pointing out that EU state aid rules have been in place since 1958, she said "no one should be denied a fair chance to compete".

Citing the Apple judgment, she continued: “Apple has to repay the benefits that they illegally received. This is a bill for unpaid taxes of benefits worth up to €13 billion, plus interest. A government cannot give special tax treatment to certain companies that are not available to others.”

The record €13 billion judgment against Ireland, which is being appealed by both the Government and Apple, has been criticised by business leaders.

In an open letter to EU leaders last week, a group representing some of the biggest names in US business, said that the “retroactive nature of the EC decision means that business can never have certainty even on its past tax liability unless or until the EC chooses to decide accordingly.”

Business Roundtable

The letter from Business Roundtable, a group representing 185 chief executives, continued: “the precedent set by this decision, if upheld, would increase uncertainty significantly with a consequent adverse effect on foreign investment in Europe, making this decision a grievous self-inflicted wound for the European Union and its citizens.”

Responding to the announcement of a new state aid investigation into Engie, Oxfam Europe said it was a “good sign that the European Commission pursues its efforts to put an end to damaging tax deals despite the criticism it faced following the Apple ruling”.

The opening of a fresh investigation into the tax arrangements offered by Luxembourg to corporations is particularly politically-sensitive for the commission given that its president Jean-Claude Juncker was prime minister when many of the tax deals were agreed.

Luxembourg is awaiting the outcome of the commission's investigation into its tax dealings with McDonald's and Amazon.