EU Eyeing Tax Drain at Spanish Postal Service

(CN) - The European Commission said Thursday it is investigating whether Spain paid its postal service too much to deliver the nation's mail.

Spain tasked Correos with "universal postal service," meaning the delivery of basic postal service throughout the nation at affordable prices and on a set schedule.

Under EU law, companies can be compensated by the state for the extra costs of providing a public service. But member states must take care not to overcompensate companies for the services so that competition on the relevant market is not distorted.

The commission said it received two complaints that Correos had benefitted from several illegal state-aid deals with Spain, leading the EU's top regulator to launch a preliminary investigation.

Thursday's opening of an in-depth investigation focuses on the commission's concerns that Spain overpaid Correos for its services between 2004 and 2010. The commission believes that Spain's use of tax dollars may have allowed Correos to achieve a profitability level that exceeded EU standards for a publicly funded company.

The commission said it will also look into whether Spain illegally granted tax exemptions and capital increases to Correos, and whether compensation for delivering election material exceeded what the EU allows.

However, the commission said Spain's social security scheme for Correos employees does not violate EU law since the money paid doesn't involve state funds. And while the employee pension plan gives Correos a financial edge because the company isn't required to contribute to the pensions and is funded with state money, the commission said the measure predates Spain joining the EU and therefore cannot be questioned now.

The opening of an in-depth investigation gives Spain and other interested parties the opportunity to comment on the allegations and does not prejudge the final outcome of the case, the commission said.

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