• Delicious




Brussels Attacks Co-ordination Centres In Member States

by Ulrika Lomas, Tax-News.com, Brussels

12 July 2001


Although the taxing tendency in the EU seemed to suffer a reverse at Tuesday's Ecofin meeting in Brussels when most Finance Ministers present attacked proposals for a harmonised eurotax, the meeting also resolved to push forward with its 'harmful tax measures' initiative, usually referred to as the Primarolo report after British Paymaster-General Dawn Primarolo who chaired the EU committee that identified 66 measures two years ago.

The Commission was quick off the mark, and on Wednesday morning announced that it was targetting 15 of the measures as illegal state aids. Eleven of them are to be investigated (a process which can take up to two years) while four of them are branded illegal right away.

The national regimes which are to be investigated are as follows:

  • Germany Special Fiscal Regime for Control and Co-ordination Centres of Foreign Companies;
  • Spain Special Fiscal Regime for Bizkaia Co-ordination Centres;
  • France Headquarters and Logistics Centres Regime;
  • France Régime des Centrales de trésorerie;
  • Ireland Tax Exemption on Foreign Income;
  • Luxembourg Co-ordination Centres Regime;
  • Luxembourg Finance Companies Regime;
  • The Netherlands Special Fiscal Regime for International Financing Activities;
  • Finland Åland Island Captive Insurance Regime;
  • United Kingdom Gibraltar Qualifying Offshore Companies Rules;
  • Gibraltar Exempt Offshore Companies Rules.

Many of these regimes are directed at attracting the headquarters companies of multinationals and usually allow a very low rate of tax to be paid both by the company itself and often by its executives as well. Countries will fight fiercely to preserve the competitive advantage these schemes give them.

The four regimes which the Commission says must be halted immediately are as follows:

  • Belgium Fiscal Regime of Co-ordination Centres;
  • Greece Fiscal Regime for Offices of Foreign Companies;
  • Italy Tax Incentives Linked to the Trieste Financial Services and Insurance Centre;
  • Sweden Foreign Insurance Companies Taxation Regime

The most significant feature of this action by the Commission is that it is emanating from the Competition Directorate under Mario Monti, the EU's Competition Commissioner, rather than from Frits Bolkestein, Internal Market and Taxation Commissioner. While this is partly because the Commission has been stymied by the unanimity requirement for taxation measures which has kept the Primarolo report in the long grass ever since it was published, it's also because Frits Bolkestein has said he is in favour of a degree of tax competition, and probably has no desire to waste his officials' time in chasing these particular spiders.

Mr Monti said yesterday: "We believe it is very important to bring to bear all our treaty instruments to ensure the process of integrating the single market is pushed as far as possible." If Brussels finds governments have been granting unfair aid to some companies through special tax breaks, it can put pressure on them to ensure the aid is paid back.

The Commission made it clear yesterday that this initiative is the beginning of a longer term exercise to ensure that no tax measures are being used to support companies in a way that is incompatible with the single market. But the Commission's actions may be open to challenge in the courts - it's very difficult to see even the most communautaire country giving up its scheme unless all countries do it simultaneously, so expect to see every possible legal device used to delay or abort Mr Monti's attack.

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