(CN) – A European court ordered France Télécom to repay more than $1.65 billion in tax breaks it received from 1994 to 2002, denying the company’s bid to nullify a European Commission decision that the tax scheme constituted illegal state aid.
The Court of First Instance, Europe’s second-highest court, sided with the commission.
According to the commission, the French government exempted France Télécom from paying local taxes, including business tax, from 1994 to 2002.
The court adopted the commission’s 2004 decision to recoup the state aid money, because it gave France an unfair competitive advantage.
The European Commission started looking into the state aid numbers for the telecom company in 2002, when France Télécom was nearing bankruptcy and the French government was considering issuing the company loan money to keep it afloat.
In 2007, the commission won a separate case at the EU high court over France’s failure to collect the funds from the company.
France should have notified the commission back in 1990 when it was setting up a special tax deal with France Telecom, the court ruled, because the tax discount scheme ran the risk of dishing France Telecom a competitive advantage in violation of European state aid rules.
The court said France Telecom could not apply taxes paid between 1991 and 1993 to make up for the later tax breaks.
The exact amount France Telecom owes is between 798 million and 1.1 billion euros, plus interest.