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Belgium has become the latest country to be ensnared in a growing crackdown on tax avoidance within the EU after the European Commission launched an inquiry into favourable tax rulings for multinationals.
In Belgium, multinational businesses can exclude from their tax bills profits. This can reduce a company’s tax bill by up to 90 per cent, according to Margrethe Vestager, the EU competition commissioner.
The so-called excess profit rulings have been a key part of Belgium’s attempts to lure foreign companies to the country. While Belgium has some of the highest taxes on labour in the EU, its corporate tax regime is far more lenient, with businesses able to reduce their tax bills far below the headline rate of 34 per cent.
But the commission argues that the rulings overestimate the benefits of being a multinational and violate rules on EU state aid, which prohibit tax laws that distort competition within the bloc. The commission also suggested that the schemes could violate EU state aid rules because the tax breaks were available only to multinational businesses.
“It appears that the deals are only struck with companies that move substantial parts of their businesses to Belgium,” said Ms Vestager.
“If our concerns are confirmed, this generalised scheme would be a serious distortion of competition unduly benefiting a selected number of multinationals.”
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