EU’s Vestager Wins Final Round in Fight Over Spanish Tax Breaks

(Bloomberg) --

European Union antitrust chief Margrethe Vestager notched up another victory in a clash over Spanish tax breaks doled out to companies such as Banco Santander SA when they bought stakes in foreign firms.

The EU Court of Justice on Wednesday dismissed the appeals of the companies, saying they failed to show that the European Commission’s orders to pay back subsidies were wrong. 

The decision, which is binding, is also a boost for the commission’s wider clampdown on special tax treatment for selected companies.

The origins of Wednesday’s top court dispute go back more than a decade, when EU regulators were handed a complaint, saying the Spanish measures unfairly funded a buying spree by big national companies. The commission ordered the nation to abolish the tax breaks and claw back fiscal advantages dating back to December 2007.

Spanish companies, including Santander, appealed, and in 2014 initially won at the EU’s lower court, which criticized the commission’s decision that the tax breaks were selective. But the commission appealed and was vindicated in a ruling two years later, which told the lower tribunal to review the case. 

“A finding that a measure is selective is not necessarily the result of it being impossible for certain undertakings to benefit from the advantage provided for by the measure,” the court said. Selectivity can happen also when a certain measure, like the tax breaks at issue, favor only certain companies, the judges said.

The commission has used similar arguments of selectivity in its crusade against unfair tax deals handed out by nations to selected businesses. 

While its use of state-aid law on tax matters has generally stood up in court, the commission suffered a major blow in 2020 when EU judges toppled its record 13 billion-euro ($15 billion) tax bill against Apple Inc. Judges in May also scrapped a 250 million-euro tax payback order against Amazon.com Inc. The EU appealed both rulings.

How big companies reduce their tax bills has become a political focus with EU regulators planning a new tax on technology firms if global tax reforms can’t be agreed.

This week will also see attempts by 140 countries seeking to resolve key details to conclude years of negotiations to overhaul global tax rules for an increasingly digitized economy. Negotiators are still wrestling over parameters of setting a global minimum corporate tax and sharing the spoils from levies on tech giants like Facebook Inc. and Alphabet Inc.’s Google, according to people familiar with the matter.

Santander grew from being a provincial lender to becoming the second-biggest by market value in the euro region through an acquisitions drive that led it to acquire banks in the U.K. and the Americas to build a balance sheet that’s as big as Spain’s gross national product. Other Spanish companies such as Banco Bilbao Vizcaya Argentaria SA, Telefonica SA and Iberdrola SA also aggressively pursued expansion abroad.

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