Profile: The driving force of Margrethe Vestager

Written by Lena Angvik Apple, Google, Amazon, Starbucks and Gazprom have all been on her “To Do” list since Vestager started investigating state aid cases two years ago. The 48-year-old has been described as straight-forward, no-nonsense and, at times, a bit steely. 

In her former role as Denmark’s economy minister, Vestager curtailed unemployment benefits. When she was interviewed on the subject, she said “sådan er det jo”, meaning “that’s how it is”. The phrase became famous in Denmark, and although many accused her of being unfeeling, she made a point out of repeating the same phrase nine times in an important political party meeting, according to the Danish magazine Euroman.

Since then, Vestager has kept a ceramic hand with a raised middle finger on her desk – sent to her by an angry trade union in the aftermath of the unemployment benefits incident – to remind herself that her policies cannot always make everyone happy, the Financial Times reported.

Apple controversy

With the €13 billion ($14.5 billion) Apple tax ruling, Vestager upset nearly everyone, sparking debate worldwide about whether Ireland had granted the tech company illegal tax benefits. Vestager said Ireland’s selective treatment towards Apple allowed it to pay an effective corporate tax rate on its European profits of 1% down to 0.005%.

Both Apple and Ireland are appealing the order to pay back taxes, however. Apple CEO Tim Cook called the ruling “total political crap” and said “they just picked a number from I don’t know where”. 

Vestager’s predecessor, former anti-trust chief Neelie Kroes, sided with Apple and called the EC decision “fundamentally unfair” in an article she wrote for The Guardian. Kroes said EU member states have a sovereign right to determine their own tax laws and that the recent state aid investigations appear to be rewriting the member states’ tax laws. 

But the straight-talking competition commissioner, who has a degree in economics from the University of Copenhagen, has remained defiant throughout – including during a three-day to trip to Washington DC and New York following the ruling. 

‘Irritating’ companies

Vestager maintains that offering a specific tax treatment to a particular company gives that company a benefit just as surely as if it had been handed a bundle of cash. 

“It is 100% legitimate to tax profit where it is generated,” Vestager told Germany’s Handelsblatt newspaper in a story published on September 18. “From our perspective, it is irritating when American companies pay less in taxes than European ones.”

Republican Senator Orrin Hatch of Utah, chairman of the US Senate Committee on Finance, issued a scathing rebuttal during Vestager’s trip to Washington on September 20. Hatch said Vestager failed to make "an effective case for this highly politicised ruling rooted in an erroneous interpretation of law."

“Rather than working with countries to strengthen the international tax framework and improve the rule of law, the European Commission, in its recent state aid ruling, opted to run roughshod over an American firm by retroactively overriding a tax opinion between a sovereign country and a company," Hatch said.

Vestager did not respond to interview requests by TP Week.

Vestager’s roots

Vestager’s upbringing in Ølgod, a small town in Denmark, may have inspired her approach to her job. More than anything else, she cares about fairness.

“I was brought up with a very strong value that you should always protect the small and the few against those who want to misuse their muscle and weight in order to get what they weren’t supposed to,” she told Reuters.   

© European Union, 2014 / Source: EC – Audiovisual Service/Photo: Etienne Ansotte

At university in Copenhagen, Vestager met her husband, maths teacher Thomas Jensen and they have three daughters. She has been a politician since the age of 21 and was appointed minister of education and ecclesiastical affairs in 1998.

From 2007 to 2014 she was the political leader of the Danish Social Liberal Party, and later the minister of economic affairs and the interior. Former Danish prime minister Helle Thorning-Schmidt nominated Vestager as Denmark’s EU commissioner, and when Vestager took the position, she vowed to continue former competition commissioner Joaquín Almunia’s state aid investigations.

Her rulings have surprised many tax experts. Corporate tax has long been considered a sovereign matter for member states, and some claim that the European Commission may be overstepping its boundaries by making politically motivated decisions. 

Joe Kennedy, a senior fellow at the Information Technology and Innovation Foundation in Washington DC, said that it appears the European Commission is pushing back against powerful American tech companies dominating the new economy and capturing a lot of money and European consumers.

“I think it is a desire to slow down American companies and also slow down this movement toward a new economy that a lot of people don’t understand or don’t accept,” Kennedy told TP Week in an interview in Washington.

“In addition to the tax investigations, there are also other investigations of privacy policies, data policies, and a lot of them are aimed at American companies. And there have also been some statements by European Commission officials about the power of American companies and about needing to rebalance the field so that European companies can compete in the future of the Internet, the Internet II, or the Internet III – or whatever iteration you are on,” Kennedy added.

“So the broader sweep of investigations – the fact that a lot of them, if not most of them, are American companies, and the fact that you have a couple of statements by people complaining about the amount of money these companies raise from European citizens and send to the United States. And there’s the difficulty that Commissioners perceive European companies might now have in rising to compete with established giants. It all indicates a bias toward levelling what Europeans see as a tilted playing field," Kennedy said.

Fiscal secrecy

Vestager argues that Brussels has given guidance to member states since 1998, warning governments that favourable tax deals to large companies might be classified as state aid. 

“This is not new,” Vestager said at a conference in Copenhagen on September 2. “The state aid rules (have) applied since 1958, and they are laid down in the treaty and ratified by parliaments in each and every member state. It’s never been a secret that tax exemptions could be state aid. I am often asked why it took so long for us to start investigating tax rulings that go back to the 90s, and the answer is that, for a very long time, fiscal secrecy prevailed over transparency.”

Vestager’s crackdown could have extensive consequences for nations keen to use favourable tax deals to attract companies. She described the Apple ruling as a clear message. “Member states cannot give unfair tax benefits to selected companies. No matter if they are European or foreign, large or small,” she said during a press conference.

Vestager comes across as tough, and her stances have earned her nicknames like “The iron lady”, “The goblin under Google’s bed” and “The Queen of Brussels”.

She told Canada’s Globe and Mail newspaper that there are limits to how soft a person can be while defending European laws. But she also has a quirky side at times – she has a habit of knitting colourful elephants during meetings. Her favourite way to relax is cooking, and in her previous role as Denmark’s deputy prime minister, she would always ride her bike to appointments with the Danish Queen Margrethe II. 

The most influential woman in Danish politics

The Danes love her, and she has long been known as the most influential woman in Danish politics, even more so than Helle Thorning-Schmidt, the former Danish prime minister from 2011 to 2015. 

Vestager, the daughter of two Lutheran pastors, surprised many when she made a racy innuendo regarding an economy growth package in her role as deputy prime minister. When the opposition complained that the package was “small”, Vestager said: “Some think it’s a rather small plan. But I am a bit cautious about trusting any judgments on size from men, and perhaps – but this might be a woman’s perspective – I am more interested in the effect.” This earned her yet another nickname, “Sultry Vestager”, reported the Financial Times.

Vestager has already hinted that there will be more state aid cases to come after Apple. But it is her approach to state aid rather than the number of cases that has raised eyebrows.

During the August 30 press conference announcing the Apple decision, Vestager implied that other European governments might also want to examine how Apple’s profit allocations are taxed, and possibly require Apple to pay more tax if they conclude that the company should have recorded its sales in those countries instead of in Ireland.

Vestager also suggested to the US that they may want to re-examine how the cost sharing agreements between the Irish branch, the non-resident Irish companies and the US operations were made. 

“The US government has not officially taken the bait from that yet as it is holding to the rule of law, so it will be interesting to see whether the commissioner actually seems to be ‘buying off’ governments to get them to ‘buy into’ what she is doing,” Kevin Conway, a tax partner at King & Spalding, said in an interview with TP Week.

Joe Kennedy described Vestager’s move as a sophisticated ploy to get the backing of other European nations: “This is an invitation, in that this is not just a dispute between Ireland and the EC, but trying to make it a dispute between all countries versus Ireland. That is clever.”