EU Court rules that the European Commission was right to say Belgian ‘excess profit’ tax scheme constituted illegal state aid
While today’s decision is a big win for the Commission, Eurodad warns that the Belgian example is a symptom of a much larger disease and the legal battles that the Commission has had to go through is a stark reminder that the international tax system is broken.
Today, the Court of Justice of the European Union (ECJ) ruled that Belgium’s "excess profit" scheme - which permitted substantial tax savings by multinational companies - did constitute illegal state aid.
This decision follows years of court processes that investigated the European Commission’s decision, which was announced in 2016. Back then, the Commission also ordered the Belgian government to recover around €700m from companies that benefited from the scheme.
Tove Maria Ryding, Tax Justice Coordinator at the European Network on Debt and Development (Eurodad) said: "Today’s decision is a big win for the Commission and it is very positive that the highly damaging Belgian tax scheme has now been ruled illegal.
"But the Belgian example is a symptom of a much larger disease. Seeing the legal battles that the Commission has had to go through when they try to ensure that multinational corporations pay a fair share of tax is a stark reminder to us all that the international tax system is broken. With the state aid cases, the Commission has tried to take on some of the most obvious and extreme examples, such as the Belgian tax scheme. But it is important to bear in mind that the cases that the Commission has taken on are just the tip of a very large iceberg of harmful tax practices and broken tax rules.
"The underlying problem here is that the international tax rules are a terrible mess and not fit for this millennium. The broken tax system is costing governments around the world billions of Euros in lost tax income every year and also has a strong negative impact on competition. Small and medium enterprises face an impossible mission when they try to compete with big multinational corporations that can use international tax loopholes to dodge tax.
"What we need is a fundamental reform of the international tax system, so that we don't have to sit through years of court proceedings to find out whether or not it is legal for a government to provide loopholes that allow multinational corporations to reduce their tax payments to extremely low levels.
"Today, a high level event is taking place at the UN to discuss the road to the reform of the global tax system and the option of developing a new UN Convention to stop international tax dodging. The EU and its member states should support this process so that we can start repairing the international tax system."
Notes to editors:
- The European Commission’s announcement from 2016 can be found here.
- The UN high-level discussion about reform of the international tax system is happening as part of a broader High-Level Dialogue on Financing for Development, taking place at the UN General Assembly in New York. The discussion on tax is planned to start at 17.15 CET and will be livestreamed on UN Web TV. The programme for the meeting can be found here.