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Global Tax 50 2015: Margrethe Vestager

02 February 2016

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European competition commissioner

Margrethe Vestager
Margrethe Vestager was also in the Global Tax 50 2014

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 taxation.

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 Luxembourg.

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 rulings.

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.

The Global Tax 50 2015
View the full list and introduction
The top 10 • Ranked in order of influence
1. Margrethe Vestager 2. Pascal Saint-Amans
3. Wang Jun 4. Arun Jaitley
5. Marissa Mayer 6. Will Morris
7. Ian Read 8. Pierre Moscovici
9. Donato Raponi 10. Global Alliance for Tax Justice
The remaining 40 • In alphabetic order
Brigitte Alepin Andrus Ansip
Tamara Ashford Mohammed Amine Baina
Piet Battiau Elise Bean
Monica Bhatia David Bradbury
Winnie Byanyima Mauricio Cardenas
Allison Christians Rita de la Feria
Marlies de Ruiter Judith Freedman
Meg Hillier Vanessa Houlder
Kim Jacinto-Henares Eva Joly
Chris Jordan Jean-Claude Juncker
Alain Lamassoure Juliane Kokott
Armando Lara Yaffar Liao Tizhong
Paige Marvel Angela Merkel
Zach Mider Richard Murphy
George Osborne Achim Pross
Akhilesh Ranjan Alan Robertson
Paul Ryan Tove Maria Ryding
Magdalena Sepulveda Carmona Lee Sheppard
Parthasarathi Shome Robert Stack
Mike Williams Ya-wen Yang

International Correspondents