The European Commission is next week expected to agree that corporate tax breaks in Belgium, Republic of Ireland and the Netherlands will remain until 2010, as part of a political compromise among the EU's 15 countries. Similar schemes in Portugal and Luxembourg have also recently been cleared by the Brussels authorities.

The Commission has dropped its probe into the substantial tax breaks - benefiting more than 200 multinational companies, including BP, Siemens and Volvo - as the price for the recent deal on savings tax.

The Commission's decision to close the inquiries after pressure from national governments could raise questions over the independence of the Brussels anti-trust authorities.

The fight against the controversial schemes, through which multinational companies pay lower corporation tax if they open special "fiscal centres" in the country, had been considered by Mr Mario Monti, EU competition commissioner, as a cornerstone of the Commission's crackdown on state aid.

These centres include the International Financial Services Centre in Dublin.

The probes were launched in 2001 as part of "longer-term measures" on tax. However, EU governments are believed to have put pressure on Mr Monti to drop the cases as a condition for striking a long-delayed deal on common rules on the taxation of savings.

The deal was a success for Mr Frits Bolkestein, the EU taxation commissioner, and a close ally of Mr Monti.

Under the compromise, which has to be finalised by next month, Belgium, Ireland, the Netherlands, Portugal and Luxembourg won the right to retain their fiscal schemes until 2010, five years longer than expected.

However, the deal still left the governments vulnerable to action from Mr Monti, who had launched the investigations in 2001 and 2002 and is not bound by agreements between EU countries.

Under EU law, the Brussels competition authorities can force governments to scrap tax breaks if they conclude they are illegal subsidies to companies.

It is understood that the governments won a reassurance the state aid probes would be closed before finalising the deal on savings taxation, an important issue that has divided the EU.- (Financial Times Service)