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Fitch Ratings does not anticipate significant damage to Luxembourg's tax base as a result of changes to corporate tax laws across the European Union.
In affirming Luxembourg's "AAA" currency rating and "stable" outlook on October 14, Fitch noted that the Government could be in line for a short-term revenue boost if the companies accused by the European Commission of receiving illegal state aid from Luxembourg are required to pay back unpaid tax.
However, one of the "key assumptions" in Fitch's assessment states that multinational companies are unlikely to desert Luxembourg in large numbers despite the perception that the corporate tax environment might become less favorable.
"Fitch assumes that the changes to the international corporate tax framework across the EU would not result in a large-scale migration of operations out of Luxembourg by Luxembourg-based multinational corporations," the ratings agency said.
In October 2015, the Commission announced following an in-depth investigation that that a tax ruling issued by the Luxembourg tax authorities in favor of Fiat Finance and Trade does not reflect economic reality such that it grants a selective tax advantage to the company in breach of EU law. Luxembourg is appealing against this ruling.
A similar conclusion was reached in December last year regarding tax rulings given by Luxembourg to McDonald's Europe Franchising in 2009, and in September 2016 the Commission launched an in-depth investigation into Luxembourg's tax treatment of the GDF Suez group, now known as Engie, which it says could also amount to illegal state aid, a claim the Luxembourg Government has rejected.
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