(CN) – The European Commission opened a formal investigation on Tuesday into whether Belgium gives illegal tax breaks to multinational corporations, yet another prong in the continent’s widening crackdown on sweet big-business deals.
Regulators said they are looking into whether a provision in Belgian tax code that allows corporate groups to reduce their tax liabilities through so-called “excess profit” rulings. Once the parent and subsidiary companies are registered with Belgian tax authorities, the scheme allegedly allows them to write off the costs of doing business on a large, multinational scale.
But the commission believes that the corporations are grossly inflating these costs, with deductions allowed by Belgian tax authorities typically amounting to more than 50 percent of profits and sometimes reaching as high as 90 percent, the EU’s regulatory body said.
And to make matters worse, the system appears to only benefit multinational corporations while excluding Belgian companies from the scheme, the commission said.
“The Belgian ‘excess profit’ tax system appears to grant substantial tax reductions only to certain multinational companies that would not be available to stand-alone companies,” said competition policy commissioner Margrethe Vestager. “If our concerns are confirmed, this generalized scheme would be a serious distortion of competition unduly benefitting a selected number of multinationals. As part of our efforts to ensure that all companies pay their fair share of tax, we have to investigate this further.”
So far, the commission hasn’t named any of the corporations that allegedly benefited from the scheme.
The commission’s announcement comes on the heels of similar investigations into whether Ireland’s deal with Apple , the Netherlands’ pact with Starbucks , and Luxembourg’s tax treatment of Amazon and Fiat comply with state-aid rules.
Regulators began investigating the tax ruling practices of member states in 2013, and extended the inquiry EU-wide this past December.
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