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EU To Probe Whether Romania Let Rail Operator Off Tax Bills

by Ulrika Lomas,, Brussels

19 December 2017

The European Commission has opened an in-depth investigation to assess whether debt write-offs by the Romanian state in favor of rail freight operator CFR Marfa, and the failure to collect tax debts from the company, have given the company an unfair advantage in breach of EU state aid rules.

Commissioner Margrethe Vestager, in charge of competition policy, said: "The rail freight market is an essential component of any economy's transport links. CFR Marfa is the incumbent in this market in Romania and has benefitted from the cancellation of public debts and the failure of public creditors to collect debts owed by it. We need to check whether a private investor would have acted in the same way as the public authorities did here and, if not, to assess whether these measures are compatible with EU state aid rules."

The Commission stated: "CFR Marfa is the incumbent fully state-owned rail freight transport services provider in Romania. The company has been in economic difficulties for a number of years. It has a high level of debt, mainly towards the national social security and tax administration agencies, as well as towards the Romanian rail infrastructure manager CFR Infrastructure, which is also fully state-owned."

"Unlike passenger rail transport, the freight rail transport market in Romania is highly competitive, with numerous private operators, some having gained considerable market share following liberalization of the market in 2007. In March 2017, the Association of Romanian Private Rail Freight Operators filed a formal complaint with the Commission alleging that CFR Marfa had received state aid in breach of EU rules."

The Commission's investigation will be looking at:

  • A number of state support measures in favor of CFR Marfa concerning a debt-to-equity swap amounting to RON1.67bn (EUR360m) in 2013;
  • The failure to collect, since at least 2010, of social security debts and outstanding taxes of CFR Marfa, and of debts towards CFR Infrastructure.

A state intervention in a company can be considered free of state aid within the meaning of EU rules when it's carried out at conditions that a private investor would have accepted. The Commission will now assess whether this was the case for CFR Marfa's public creditors or whether, on the contrary, the state intervention has given CFR Marfa a selective economic advantage over its competitors and constitutes state aid.

If the Commission were to conclude that CFR Marfa has received state aid, it would then assess whether this could be compatible with EU rules that authorize certain categories of aid.

TAGS: tax | European Commission | Romania | social security | services | Europe

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