'Time for a fundamental strategy on State aid to multinationals'
The debate on tax evasion by multinationals is in full swing in many Member States. Last week it was announced that the European Commission has started an investigation into possible illegal State aid from the Netherlands to Nike. It is likely that dozens of other companies are getting away with it.
Although there are possibly more companies paying too little tax, these are not being investigated by the European Commission. But the Danish Euro commissioner Vestager is having Nike investigated. 'Can you select one company and present it as a scapegoat, to serve as an example to others?', asks Anna Gunn in Dutch newspaper Trouw. Gunn is conducting PhD research at Leiden University on European State aid rules. 'Don’t get me wrong, if I was Vestager I would do exactly the same. After all, it works, it’s highly effective. This approach, however, undermines the credibility of the system since enforcement is inconsistent. On the other hand, of course the Commission can’t investigate all companies. They don’t have the capacity to do that.'
The Commission suspects that the Netherlands has determined an amount for Nike’s profit which is too low, by allowing high royalty payments to other companies belonging to Nike. Shouldn’t then the full conduct of the Netherlands be investigated, instead of the agreements between the Tax Authorities and Nike? 'Almost impossible', Associate Professor tax law Jan Vleggeert adds in the same article. 'This is about transfer prices which are different for each company. The only possibility is to investigate these at company level if there is reason to do so. But capacity problems at the Commission don’t allow this.'
Gunn calls for a more fundamental strategy to deal with this form of illegal State aid. By opting for cases that attract a lot of attention and much public outcry the Commission is cherry picking. In doing so, in the long term it undermines faith in the State aid rules as such. This doesn’t seem fair.'