The Netherlands: Is the Competition Fair?

"To deliver all its benefits our Single Market requires fair competition. There must be equality of arms for all market players and I am confident that the Netherlands will adapt their tax laws in that respect" - Commission Vice President in charge of competition policy Joaquín Almunia said:
Under the Dutch Corporate Tax Law, economic activities by public bodies – either as part of the public administration or in the form of publicly owned companies – are, in principle, exempted from corporate tax. It is true that there are a number of exceptions from this exemption: certain economic activities (like farming or mining) and certain publicly owned companies (like Schiphol airport in Amsterdam or the National Lottery) are subject to corporate tax. Nevertheless, there are many economic activities by public bodies – including all services – and many publicly owned companies that remain exempted. Such companies include the port of Rotterdam, Holland Casino, Maastricht's airport, several development agencies, Bank of Industry LIOF or Twinning Holding. These companies compete directly with private players in the Netherlands and in the EU Single Market who do not benefit from the same treatment.
In July 2008, following a number of complaints, the Commission informed the Dutch authorities of its preliminary view that the measure distorted competition in the internal market, in breach of Article 107(1) of the Treaty on the Functioning of the EU (TFEU). The Commission's investigation found that the different tax treatment of publicly and privately owned companies pursuing an economic activity gives publicly owned enterprises a selective advantage.Abolishing the corporate tax exemption for economic activities by all public bodies, both as part of the public administration or in the form of publicly owned companies, so that public and private economic activities are taxed in the same way. This would best address the issue.
Alternatively, abolishing the corporate tax exemption only for publicly owned companies provided that all economic activities currently carried out by the public administration are hived off into (publicly owned) companies subject to corporate tax.
The Netherlands now have to inform the Commission within one month whether it can agree to the proposed amendments. Failing an agreement, the Commission may open a formal state aid investigatioDutch public companies benefit from an exemption from corporate tax since 1956, before the Netherlands accession to the EU. The measure is therefore considered as existing aid (i.e. as an aid measure which was already in place before the Treaty of Rome came into force) and its assessment is subject to a specific cooperation procedure between the Netherlands and the Commission. When the Commission finds existing aid to be in breach of EU state aid rules, it does not ask for the Member State to recover the aid granted but rather asks it to put an end to the measure.

 

Colin Stevens