European Union regulators ordered France to recover 1.37 billion euros ($1.5 billion) in state funds from Eléctricité de France after concluding the French electricity supplier had benefited from illegal tax breaks, reports The Wall Street Journal.
The decision comes amid a broader EU crackdown on alleged tax avoidance by major companies that has already embroiled Apple Inc., Amazon.com Inc. and Starbucks Corp. The issue is a priority for policy makers in Brussels, as governments across the region seek to shore up crisis-hit public finances and convince taxpayers that the wealthiest companies are paying their fair share of taxes.
In a statement Wednesday, the European Commission, the bloc’s top antitrust authority, said France had failed to charge EDF all the corporation tax it owed in 1997. The French state is the majority shareholder of EDF, holding 85% of its capital.
That tax break gave EDF “an undue economic advantage compared with other operators on the market and so distorted competition,” the commission said.
“Whether private or public, large or small, any undertaking operating in the [EU’s] single market must pay its fair share of corporation tax,” EU antitrust chief Margrethe Vestager said in a statement.
The Paris-based company said it would pay the French government as ordered by the EU, but would also lodge an appeal with the EU courts.
“EDF denies the existence of unlawful state aid,” the company said in a statement. It said it would book losses associated to the payment on its first-half earnings next Thursday and in the second-half data in six months.
It is the second time that EU regulators have ruled on the EDF case, after their initial decision in 2003 was annulled by the bloc’s appeals courts in Luxembourg.
At issue are a series of provisions in EDF’s accounts that were made between 1987 and 1996, aimed at providing for a renewal of the company’s network. When EDF’s balance sheet was restructured in 1997, French authorities “reclassified some of these provisions as a capital injection without levying corporation tax,” the commission said.
The EU started investigating the case more than a decade ago. It ruled in 2003 that EDF should repay the funds, but the decision was overturned by the courts in Luxembourg, which said the commission hadn’t checked whether a private investor would have acted in a similar way to the French government.
To address those concerns, the EU reopened its investigation in 2013. It concluded that the aid wasn’t justified from the viewpoint of a private investor “because at the time the profitability that could reasonably be expected of such an investment was too low,” the commission said Wednesday.
Ms. Vestager’s agency has been leading the bloc’s crackdown on tax avoidance, using its powers to police so-called state-aid rules that prohibit governments from providing support to some companies and not others.