EU Commission orders Estonia and Poland to reveal corporate tax 'comfort letters'

By bne IntelliNews June 8, 2015

bne IntelliNews -

 

The European Commission on June 8 ordered Poland and Estonia to provide details on their tax rulings practice within a month, claiming they are obstructing a probe into tax practices in the bloc. 

"Both countries have to-date refused to respond in full to previous information requests," the EU executive said in a statement. "Should any of the two fail to deliver the missing information within one month, the Commission may refer that member state to the EU Court of Justice."

The EU executive has been probing tax rulings across the European Union in the aftermath of the LuxLeaks scandal, which uncovered favourable tax decisions made for companies that Brussels says may constitute illegal state aid. 

Estonia and Poland have cited fiscal secrecy in their refusal to hand over the information demanded, and argue that probing tax rulings is not with the Commission’s competence. They have submitted general information but refused to provide a specific and detailed overview of tax rulings issued from 2010 to 2013, the Commission says.

Tax rulings are comfort letters issued by tax authorities to an individual company on a specific tax matter. “If a tax ruling results in a member state providing selective advantages to specific companies or groups of companies, this distorts competition in the single market in breach of EU state aid rules," the statement continues.

The Commission started its inquiry into tax rulings in December, with an aim to clarify allegations that “tax rulings may constitute state aid and to allow the Commission to take an informed view of the practices of all member states".

The inquiry was spurred by the so-called LuxLeaks scandal that shed light on Luxembourg’s favourable tax rulings issued for Fiat Chrysler and online retailer Amazon, as well as coffee chain Starbucks's deal with the Netherlands and Apple's Irish arrangements.

With the exception of Estonia and Poland, all EU countries have cooperated and provided the required information in full, the EU executive notes. 

EU Commissioner in charge of competition policy Margrethe Vestager said: "We are putting together the puzzle of tax ruling practices in the EU. Sometimes we had to ask member states twice – or more – to provide information. Still, there are pieces missing: To have a complete overview we also need full information from Estonia and Poland. But based on the replies we have now received, I am today asking for tax rulings from 15 countries. We want to analyse them carefully to find out whether member states employ tax rulings to grant companies selective tax advantages that breach EU state aid rules."

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