Margrethe Vestager was also in the
Global Tax 50
Former Danish minister for economic and interior affairs and
deputy prime minister Margrethe Vestager has made the tax world
sit up and take notice since her appointment as European
Commissioner for Competition in November 2014.
While the use of state aid challenges to address tax matters
was not uncommon before her ascension to the role, it has
unquestionably intensified under her leadership. Once used
solely to address unfair advantages given by governments to
private companies, the definition of state aid has become
somewhat warped in the past few years.
Now, state aid seems to be an all-encompassing umbrella
under which, more and more, tax advantages and particularly tax
rulings given to large companies are scrutinised.
Tax rulings from around Europe are now being examined by
Vestager's department, with famous examples including
McDonald's and Fiat in Luxembourg, Starbucks in the Netherlands
and Apple in Ireland.
The spate of EU state aid investigations will have
implications far beyond the EU, too. It will affect the bottom
line of foreign companies that do business in the EU, and could
force profits back onshore in the US.
"A tax ruling that agrees to McDonald's paying no tax on
their European royalties either in Luxembourg or in the US has
to be looked at very carefully under EU state aid rules," said
Vestager in December 2015. "The purpose of double taxation
treaties between countries is to avoid double taxation
– not to justify double non-taxation."
In January 2016, a whole system for creating tax rulings
– the Belgian excess profits tax scheme – was
determined to be illegal by Vestager. In the press conference
heralding the decision, she also mentioned that the Commission
will, in late January, present a package of measures as part of
its action plan for fair, transparent and efficient corporate
A vote by the European Parliament on January 19 presents
another worrying escalation of the state aid saga for
governments of tax-competitive jurisdictions. Members of the
European Parliament (MEPs) voted 500-137 that:
"If EU member states are ordered to recover money from a
company due to infringements of tax-related state aid rules,
this money should be returned not to the same member state, but
to member states that have suffered an erosion of their tax
bases or to the EU budget."
Should such a notion become law, it would leave member
states not only having to claw back millions of euros from
companies they desperately want to remain established in their
territories, but then having to distribute that money to other
member states, presumably those where said companies have more
economic substance. It could be a death knell for the tax
practices employed by small countries like EU founder-member
State aid challenges used in the way they are employed by
Vestager are a blunt instrument, intended to scare member
states away from employing what the Juncker Commission sees as
harmful tax practices. They will no doubt be the biggest
post-BEPS issues for European taxpayers operating aggressive
tax practices or taking advantage of favourable tax
Vestager, while not the architect of this effective tactic,
is the commander-in-chief applying it rigorously across Europe.
She had not been in the role long when she featured in the
lower rungs of last year's Global Tax 50, but our prediction
that her influence would skyrocket in her first full year in
the job proved to be accurate, hence her rise to the top of the
Global Tax 50 2015.
Pierre Moscovici, European tax commissioner and another
entrant on this list, says Vestager "has done sterling work to
address tax evasion through the state aid rules" during 2015
and even those that disagree with the manner in which state aid
challenges are being conducted cannot deny the work Vestager
has put in during 2015.
"It's a brave effort that Commissioner Vestager is putting
into it, but it's the wrong tool for the purpose," says
Eurodad's Tove Ryding, another Global Tax 50 entrant.