#StateAid – ‘Only in Belgium’

| January 11, 2016 | 0 Comments

160111StateAidForDummiesFinal

By Catherine Feore

2016 has only just begun, but Belgium looks like it is already in the running for the most flagrantly illegal state aid of the year prize. The Belgian ‘Excess Profit’ scheme is like a ‘How to…’ guide on creating an illegal state aid scheme.

There has been a lot of wailing and gnashing of teeth about the EU picking on American multi-nationals. In the Belgian decision, the European Commission hasn’t just shown that it is going to rigorously implement the law, but that it is blind to which companies benefited from state aid. Of the €700 million fine, €500m will have to be found in the teapots of European multinationals. Which we all hope will bring an end to the cries of “they don’t play fair” from the other side of the Atlantic.

So here we go, your guide to how to create illegal state aid:

Step one: Are you a state? Why not give a few companies a big fat economic advantage? What about a massive state guaranteed loan, a grant or a massive tax dodging scheme? Don’t play it small, make this advantage egregious and outside any possible exemption. Go on, wave a red flag, snub your nose at those faceless bureaucrats, you might as well be hung for a sheep as a lamb.

Belgium chose an excess profit tax scheme. There is a very subtle clue in the name, maybe you missed it? Belgium recognized that the companies that were really in need of state assistance from the public purse were those that exceeded a normal profit. So these companies were given a tax break of between 50–90% on their excess profit to increase their excess profit. After all, when you’re only a stone’s throw from Luxembourg and the Netherlands, you might as well give it a try. As they say, if you can’t beat ‘em, join ‘em.

Step two: Be selective. Don’t offer this freebie to any Tom, Dick or Harry; limit it to a select group. Again, the Belgians lead by example, they focused on the much-maligned multinational company. If you were pitching it, this is a kind of David and Goliath role-reversal story. The more obvious the discrimination, the easier it is to tell that it is ‘illegal’. Commissioner Vestager quickly pointed out that the scheme put “smaller competitors that are not multinational on an unequal footing”. When I say quickly, I mean over ten years after the scheme was created – we are talking Commission time here.

Step three: Distort and have an impact on trade between member states. Shrug your shoulders and say “sure, they’re all at it”. Who knows, at least you have the company of plucky little Luxembourg, Ireland and the Netherlands.

As an aside, if you throw in Andorra, Barbados, the Cayman Islands, Liechtenstein and Monaco, we can see what appears to be an inverse relationship between square metres and tax avoidance. Pay attention, Scotland and Catalonia!

Step four: Don’t use your national language – even if in the case of Belgium, this gives you a choice of three – choose English, the EU’s lingua franca. Remember, you don’t want anyone to overlook this scheme. Remember, to be truly illegal, you want to be caught (eventually). So make sure you stand proud, call the your brochure something like  ‘Only in Belgium’ – you can almost see the cheeky wink. Goddammit, make it your logo. Wear your national defiance on your sleeve.

Step five: Come up with a very bad defence. In Belgium, this consisted of claiming that you were preventing double taxation (being charged in two jurisdictions for the same profit). Then weaken this defence through records demonstrating that at no time was any company asked to provide evidence of double taxation. In the words of the Commission, this results in ‘double non-taxation’.

Step six: Under no circumstances when you are creating a state aid scheme should you consider running it past the European Commission; the boring technical name for this is ‘notification’. We all know that those bureaucratic pen-pushers are likely to pour a big bucket of cold water over your well-laid plan. Follow the advice of Nike: ‘Just do it’.

Et voilà – illegal state aid!

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Category: A Frontpage, EU, European Commission, Opinion, State aid

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