EU Probes Luxembourg's Tax Treatment of Engie--Update
19 September 2016 - 4:36PM
Dow Jones News
By Laurence Norman and Inti Landauro
BRUSSELS--The European Commission said Monday it had opened a
probe into whether Luxembourg's tax treatment of French energy
giant Engie SA breached European Union state-aid laws, the latest
in a series of high-profile investigations looking at past tax
deals.
The move sets up a potential clash between the EU's executive
arm and one of the largest and most powerful French companies in
which the French government has a 32.8% stake.
It comes after U.S. accusations that the EU was targeting mainly
American companies in its tax probes. Last month, the commission
ordered Ireland to collect some EUR13 billion in unpaid taxes from
Apple Inc. ($14.5 billion).
Monday's announcement also came as the EU's competition
commissioner Margrethe Vestager started a three-day tour of the
U.S., her first trip there since the Aug. 31 Apple ruling.
The commission, the EU's executive arm, said it had concerns
that several tax rulings made in September 2008 by the Luxembourg
authorities may have given GDF Suez group, now called Engie, an
unfair advantage over other companies.
The commission said that several tax rulings between different
Engie units appeared to allow the company to reduce its tax bills
on profits arising in Luxembourg.
The commission said that several tax rulings granted by
Luxembourg to Engie appeared to allow the company to reduce its tax
bills on profits arising in the country.
The commission is looking at two zero-interest loans that could
be converted into equity which were granted by two Engie units to
two others in 2009 and 2011. In those transactions, one side
deducted the expenses as interest rates, while the other side
deducted the income as dividend.
As a result, the commission said, the company may have paid no
tax on a "significant proportion of the profits" generated by the
transactions.
In a statement, Ms. Vestager said the rulings "seem to
contradict national taxation rules and allow GDF Suez to pay less
tax than other companies."
The commission didn't say how much money might be at stake in
the case. A spokesman, Ricardo Cardoso, said this would only start
to become clear when they receive more information from the company
and Luxembourg authorities.
"Engie will fully cooperate with the commission on the
investigation," a spokeswoman said. She said the company's units in
Luxembourg are not shell companies. Roughly 300 people work for
Engie in the country, mainly in energy services. The company has an
energy trading desk in the city of Luxembourg.
The spokeswoman declined to provide the amount of taxes Engie
has paid in Luxembourg since 2008 and how much profit it has made
there.
Finance Minister Michel Sapin hasn't made any specific comment
on the Engie case yet, but he has repeatedly said companies,
whether private or state-owned, should pay taxes in the country
where they make profits, an official at the Ministry said
Monday.
In a statement following the announcement of the probe,
Luxembourg's finance ministry said the government "considers that
no special tax treatment or selective advantage has been awarded to
any Engie group company in Luxembourg."
A commission spokesman, Ricardo Cardoso, denied that the
announcement of the probe into Engie, in which the French
government still holds a 33% stake, was timed to coincide with Ms.
Vestager's trip to the U.S.
"We will always apply state aid rules to all companies and this
independently of whether they are EU-based or U.S.-based companies
or based anywhere else for that matter," he said.
The in-depth investigation into Engie is the first to come out
of the information gathered from an EU-wide inquiry into tax
rulings in 2014. So far, the commission has received information on
some 1,000 tax rulings in 23 EU countries.
That exercise was launched after a huge document leak showed how
Luxembourg, whose longtime former prime minister is the current
commission President Jean-Claude Juncker, helped international
companies funnel profits into the country and pay minimal
taxes.
Mr. Juncker has said he wasn't involved in the detail of the tax
decisions.
Gabriele Steinhauser contributed to this article.
Write to Laurence Norman at laurence.norman@wsj.com and Inti
Landauro at inti.landauro@wsj.com
(END) Dow Jones Newswires
September 19, 2016 11:21 ET (15:21 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.