So, (1) companies adhered to Belgium laws, (2) Belgium laws were found to be violating international agreements and (3) _companies_ are supposed to pay for it?
What the fuck? Why doesn't Belgium pay for its violation itself? Why someone who was adhering to the law would need to pay because the law was found to be wrong?
I must have misunderstood this somehow, because this is just too idiotic otherwise.
>I must have misunderstood this somehow, because this is just too idiotic otherwise.
You did misunderstood. Belgium incorrectly offered tax aid to companies and now it's required to rectify it, hence said companies must pay what is legally required.
> If someone gave me money that he couldn't give me (for example, he stole it)
What's happening here is that the person never had the legal right to give you that money. So you're in factual possession of money that you don't - can't - legally own.
I think it's a matter of framing the issue. Tax deals and rebates are already subject to reinterpretation. Even personal income tax can be re-evaluated later (up to seven years in NL, I believe).
This is not a fine, it is a tax correction. These happen all the time, especially with complex tax structures that multinational businesses use.
Corporations also usually keep aside some profits resulting from tax breaks or incentives in case they are overturned in the future with the change of government or interpretation of laws.
> If someone gave me money that he couldn't give me (for example, he stole it), I'm not required to give it back — he is.
Actually, this is not how the world works. If you buy stolen goods, you're liable, and they can be taken away from you (in Italy, you can actually get fined for buying stolen goods!)
In the country I live in, if you are in possession of stolen goods and the owner can prove they were stolen, they are entitled to the goods back. Doesn't matter how many transactions it went through or how hard you tried to determine if they were stolen. It's up to you as the buyer to verify it. I suspect it is the same in most places.
If someone gave me money that he couldn't give me (for example, he stole it), I'm not required to give it back — he is.
Another example is banks- sometimes it comes up that banks accidentally credit people's accounts with huge sums in error. This money does not belong to those people, and if they withdraw it, the banks can take legal action to get it back.
US analogy: imagine that Texas said you didn't have to pay Federal income tax. After a couple of years of wrangling, this gets ruled unconstitutional. Would you expect to have to pay the back taxes?
(it doesn't quite map across directly, because EU federalism is less central than US federalism; in particular the EU has no direct tax powers, and we haven't had the Federalism civil war yet)
You can't make an US analogy as countries of UE have deliberately joined the UE and can quit UE in a click of the fingers has no UE army will invade and rule the freed country.
I don't think Belgium can exactly quit in a snap of their fingers; besides, I did say it wasn't an exact analogy, and this is what I meant by "we haven't had the federalism civil war yet". Trying to quit the EU is unknown territory, especially for countries that are part of the monetary union (Greece passim)
> "And here I get a huge WTF. If someone gave me money that he couldn't give me (for example, he stole it), I'm not required to give it back — he is."
It has to be like that or laundering stolen money/goods becomes trivially easy - just give it to a third party and later on they give it back to you or to an entity that would benefit you.
Belgium already paid for it, in the form of the tax aid they gave the companies. It just turns out that it was illegal and said tax breaks, which Belgium already paid for, need to be returned.
> Belgium already paid for it, in the form of the tax aid they gave the companies.
I think we must clarify things and what "it" is
(1) Giving tax break is what Belgium wanted to do. Belgium offered aid, companies took it.
(2) The fact that said tax breaks (or aid) were illegal is the violation of the law that someone is supposed to pay for.
Belgium paid for (1), of course, that was it's intention. But it does _not_ pay for (2): it actually gets it's money back because of (2), if I understand correctly. Or this money goes back directly to EU, this is not important; anyway, Belgium is not losing money because of (2), companies are.
So, companies are paying for performing action that was completely legal in the law of the country they were operating in. Companies are paying for Belgium lawmaker's mistake.
Apart from tremon's excellent point elsewhere that you've noted, don't forget this sort of thing already happens all the time.
If a region (say a state or a county in a state or a town in a county in a state) helps a company out and that turns out to be wrong, passing legislation it wasn't allowed to, why would you expect the company to also get off the hook? That would seem to provide an even greater incentive to perform corruption because once it's done, as the company you're immune from the consequences.
Especially big multi-nationals with lots of lawyers who knew the possibility that this exact thing would happen. They went in to this deal knowing full well the EU might turn around and say the deal violated the company aid treaties.
You automatically assume corruption, I can see why. But still, (1) getting tax breaks or government help and (2) using illegal methods to get said tax breaks and government help are two different things. If you want to punish someone for getting government help, then you're using correlation of 1 and 2, but correlation does not always imply causation. And more importantly, in case of law people generally try to determine that someone _certainly_ did something wrong instead of relying on the notion that he did it with high probability.
So, if you can prove that the company engineered it through illegal means — feel free to do that. But don't forget that there are quite a lot of completely legal and ethically clean methods in lobbying. Quite often, all that company has to do to influence policy is to meet with the official and present their reasonable point of view on the issue, without any gifts, bribes or campaign contributions.
Your misconception is that the action was "completely legal in the law of the country they were operating in". Belgium is part of the EU and the EU rules on state aid are in the Treaty on the Function of the European Union, which is a higher legal source than any national law - even the national constitutional law - of any of the EU's member states.
Actually, it's not money given to companies, it's tax not reclaimed by Belgium (a tax break). So in fact, companies are not in possession of goods illegally obtained, they are in possession of money they earned by working and that Belgium told them they could keep.
But the violation of international law was performed by Belgium, not the companies receiving aid. It was mistake by Belgium lawmakers. Why do companies have to pay for it?
But — they were illegal in international law. They were legal in Belgium law, it's the Belgium law that was illegal. So, it was Belgium that did something illegal, not companies. Right?
What if you gave it to me a year ago and I broke it? Or lost it? Or if I used it to create something else and sold it already? What if you steal money and buy a dinner from my restaurant? Do I have to give the money back?
There's a whole bunch of laws around this that I've no idea the details of, and that mostly seem to be related to not-quite-this idea. I think the key point is the difference between possession and ownership.
My layman impression is that you have to pay damages of equal value.
Under Dutch law:
- the original owner gets a claim on you for the replacement value of the thing
- same if you lost it
- not sure what that means
- the money is not gifted to the restaurant owner, so no.
I don't think you have misunderstood, the linked press release explicitly says that
> to restore fair competition, Belgium now has to recover the full unpaid tax from the at least 35 multinational companies that have benefitted
I fully agree that this should not happen. If you can't rely on the law of those nominally sovereign European countries to actually apply, that's very damaging indeed. Not being able to rely on the law as written is one marker of a failed state.
I'm not sure this is actually a tax law, rather than a series of sweetheart deals made by the Belgian tax authority based on an interpretation of law which subsequently turned out to be illegal.
> Under such [four year, renewable] tax rulings, the actual recorded profit of a multinational is compared with the hypothetical average profit a stand-alone company in a comparable situation would have made. The alleged difference in profit is deemed to be "excess profit" by the Belgian tax authorities, and the multinational's tax base is reduced proportionately. This is based on a premise that multinational companies make "excess profit" as a result of being part of a multinational group, e.g. due to synergies, economies of scale, reputation, client and supplier networks, access to new markets. In practice, the actual recorded profit of companies concerned was usually reduced by more than 50% and in some cases up to 90%.
Exactly ! retroactivity is the worst thing to do for a tax. It tells everybody that you can't predict how many tax you'll pay in the future. So your totally subject to despoliation. This is the worst message to investors as they can't predict anything about the future if they invest in UE.
You need to understand the setup of the European Union and EU state aid law. Part of the idea of the EU is creating a common internal market between the 28 EU member states. For creating a level playing field that is not distorted by state intervention, you have to prevent single member states from giving unilateral advantages to their own companies (ie creating "national champions"). So if member state A gives an illegal subsidy to a company, you could of course fine member state A to prevent this behaviour in the future - but you would not be able to remedy the distortion of competition that already occured because of the subsidy. It is much more efficient to order member state A to recover the illegal subsidy they granted to the company in the first place.
It is quite telling that the Belgian government in this case is actually going to appeal the Commission decision - although the Commission decision would lead to Belgium being granted 800 million Euros!
I live in Belgium and the news today is that our government will have to pay huge damage claims to these companies for misleading them, which will probably amount to more than the reclaimed tax. Our current government is led by different parties than the ones who introduced the tax loopholes, so you can imagine the fallout and blame game...
Don't worry about damages claims, EU state aid law > national law. Even if national courts would grant a damages claim, the EU Commission would just order a recovery again, because it would be state aid in another form. Not exactly the same, but the Micula case is similiar: http://europa.eu/rapid/press-release_IP-15-4725_en.htm
According to the newspaper, the companies can claim that they were misled by the laws and made their decisions to invest here solely on these laws. So they can also try to claim future costs which are caused by being based in Belgium. I'm not a lawyer so I don't know if you're right.
While I would deplore having to hand over more government money to these multinationals (especially since I am a small business owner in Belgium myself), I still believe that the rule of law is more important. These deals shouldn't have existed in the first place, but I think the erosion of trust if they are retracted without compensation is also a grave cost...
Oh sure nobody knows how it will turn out in detail. But it's important to keep in mind what the EU Commission as the decisive actor wants. If companies would be compensated for the retraction of illegal tax subsidies - for example, by only having to pay the legal tax rate of the alternative country they would have chosen - there would be no incentive to avoid these tax deals: Either a) the subsidy is legal under EU law or b) the company gets compensated and receives the best legal tax rate they could have gotten anyway.
But it's just my estimation, I could easily be wrong though. And I'm happy with any outcome, because all lead to lots of billable hours :)
So let's suppose I am a company that saw a green field to extend to - a country which gets out of its way to entice me to come and develop there. Now I am in their yard, keeping my part of the bargain, the moment in which they draw out their claws and looking hungry at me say "you know what, forget what we've told you, it wasn't good anyway, so let's make a new deal".
I think it's fitting. When they move their business out of country to avoid taxes they can't expect the same legal protections. I'm going to laugh when these businesses move to China and the government seizes them for national interests. By avoiding taxes they are starving the dog that protects them.
A company extends itself into different countries for a lot of different reasons, not only for avoiding taxes. Besides the mentioned tax cuts, the move into Belgium could have been also because they needed a foothold somewhere in European Union anyway, and also it could have been for some level of expertise that was harder to achieve otherwise, and possibly a lot more. It's about the whole package.
China has a policy of allowing external players into its playground only in partnership with a local company over which the government has absolute power and control. That is a bitter pill to swallow, but some choose to take it any way! China can arbitrarily change its rules (which are bad enough as they are) at any time (usually into something worse), I'll give you that. But it doesn't make it feel better with going through the current Belgian/EU debacle!
The majority of the tax to be recovered are actually related to European and not US companies: "While declining to name the companies who benefitted from the tax scheme, Commissioner Vestager said that €500 million of the total tax bill of €700 million related to European companies, a development that may appease critics of the European Commission who have accused Brussels of unfairly targeting US multinationals."
Yeah, it's not EU vs US, it's EU closing a Belgian tax loophole for non-EU multinationals that the US had already criticized. EU and US seem to be on the same side here. Except for Belgium.
This is how it has to be. This short sighted race to the bottom will not benefit anybody in the long run.
I have no sympathy for big multinationals which make a bucket load of money but still shopping around the world to get even less taxes.
It is really just a variation of big multinationals going to corrupt 3rd world countries and getting an unreasonable sweet deal from a dictator. When the dictator is thrown out and a democratic government gets in charge, the multinationals cry that their previous deal is renegaded.
The point is that any multinational has to take into consideration what it is reasonable to expect. If a deal is too sweet to be expected to last you don't get into it and start crying about it being revoked later.
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[ 2.8 ms ] story [ 128 ms ] threadWhat the fuck? Why doesn't Belgium pay for its violation itself? Why someone who was adhering to the law would need to pay because the law was found to be wrong?
I must have misunderstood this somehow, because this is just too idiotic otherwise.
You did misunderstood. Belgium incorrectly offered tax aid to companies and now it's required to rectify it, hence said companies must pay what is legally required.
OK, that's reasonable.
> hence said companies must pay what is legally required.
And here I get a huge WTF. If someone gave me money that he couldn't give me (for example, he stole it), I'm not required to give it back — he is.
Why isn't Belgium held responsible for it's actions?
What's happening here is that the person never had the legal right to give you that money. So you're in factual possession of money that you don't - can't - legally own.
This is not a fine, it is a tax correction. These happen all the time, especially with complex tax structures that multinational businesses use.
OK, this explanation finally makes sense to me. Thanks.
Actually, this is not how the world works. If you buy stolen goods, you're liable, and they can be taken away from you (in Italy, you can actually get fined for buying stolen goods!)
I think you can be fined for _knowingly_ buying stolen goods everywhere.
But what about stolen money? That could've gone away in series of thousands of transactions with thousands of counter-agents since it was stolen?
If someone gave me money that he couldn't give me (for example, he stole it), I'm not required to give it back — he is.
Another example is banks- sometimes it comes up that banks accidentally credit people's accounts with huge sums in error. This money does not belong to those people, and if they withdraw it, the banks can take legal action to get it back.
(it doesn't quite map across directly, because EU federalism is less central than US federalism; in particular the EU has no direct tax powers, and we haven't had the Federalism civil war yet)
It has to be like that or laundering stolen money/goods becomes trivially easy - just give it to a third party and later on they give it back to you or to an entity that would benefit you.
I think we must clarify things and what "it" is
(1) Giving tax break is what Belgium wanted to do. Belgium offered aid, companies took it.
(2) The fact that said tax breaks (or aid) were illegal is the violation of the law that someone is supposed to pay for.
Belgium paid for (1), of course, that was it's intention. But it does _not_ pay for (2): it actually gets it's money back because of (2), if I understand correctly. Or this money goes back directly to EU, this is not important; anyway, Belgium is not losing money because of (2), companies are.
So, companies are paying for performing action that was completely legal in the law of the country they were operating in. Companies are paying for Belgium lawmaker's mistake.
If a region (say a state or a county in a state or a town in a county in a state) helps a company out and that turns out to be wrong, passing legislation it wasn't allowed to, why would you expect the company to also get off the hook? That would seem to provide an even greater incentive to perform corruption because once it's done, as the company you're immune from the consequences.
Especially big multi-nationals with lots of lawyers who knew the possibility that this exact thing would happen. They went in to this deal knowing full well the EU might turn around and say the deal violated the company aid treaties.
Get of the hook — for what?
You automatically assume corruption, I can see why. But still, (1) getting tax breaks or government help and (2) using illegal methods to get said tax breaks and government help are two different things. If you want to punish someone for getting government help, then you're using correlation of 1 and 2, but correlation does not always imply causation. And more importantly, in case of law people generally try to determine that someone _certainly_ did something wrong instead of relying on the notion that he did it with high probability.
So, if you can prove that the company engineered it through illegal means — feel free to do that. But don't forget that there are quite a lot of completely legal and ethically clean methods in lobbying. Quite often, all that company has to do to influence policy is to meet with the official and present their reasonable point of view on the issue, without any gifts, bribes or campaign contributions.
Not even the law is above the law.
But the violation of international law was performed by Belgium, not the companies receiving aid. It was mistake by Belgium lawmakers. Why do companies have to pay for it?
My layman impression is that you have to pay damages of equal value.
> to restore fair competition, Belgium now has to recover the full unpaid tax from the at least 35 multinational companies that have benefitted
I fully agree that this should not happen. If you can't rely on the law of those nominally sovereign European countries to actually apply, that's very damaging indeed. Not being able to rely on the law as written is one marker of a failed state.
> Under such [four year, renewable] tax rulings, the actual recorded profit of a multinational is compared with the hypothetical average profit a stand-alone company in a comparable situation would have made. The alleged difference in profit is deemed to be "excess profit" by the Belgian tax authorities, and the multinational's tax base is reduced proportionately. This is based on a premise that multinational companies make "excess profit" as a result of being part of a multinational group, e.g. due to synergies, economies of scale, reputation, client and supplier networks, access to new markets. In practice, the actual recorded profit of companies concerned was usually reduced by more than 50% and in some cases up to 90%.
http://europa.eu/rapid/press-release_IP-16-42_en.htm
It is quite telling that the Belgian government in this case is actually going to appeal the Commission decision - although the Commission decision would lead to Belgium being granted 800 million Euros!
While I would deplore having to hand over more government money to these multinationals (especially since I am a small business owner in Belgium myself), I still believe that the rule of law is more important. These deals shouldn't have existed in the first place, but I think the erosion of trust if they are retracted without compensation is also a grave cost...
But it's just my estimation, I could easily be wrong though. And I'm happy with any outcome, because all lead to lots of billable hours :)
Vasque Country government aids were deemed ilegal and they didn't had to pay companies damages for the tax breaks
https://en.wikipedia.org/wiki/Double_Irish_arrangement
https://en.wikipedia.org/wiki/Jean-Claude_Juncker#Controvers...
China has a policy of allowing external players into its playground only in partnership with a local company over which the government has absolute power and control. That is a bitter pill to swallow, but some choose to take it any way! China can arbitrarily change its rules (which are bad enough as they are) at any time (usually into something worse), I'll give you that. But it doesn't make it feel better with going through the current Belgian/EU debacle!
http://www.irishtimes.com/business/vestager-denies-delay-in-...
I have no sympathy for big multinationals which make a bucket load of money but still shopping around the world to get even less taxes.
It is really just a variation of big multinationals going to corrupt 3rd world countries and getting an unreasonable sweet deal from a dictator. When the dictator is thrown out and a democratic government gets in charge, the multinationals cry that their previous deal is renegaded.
The point is that any multinational has to take into consideration what it is reasonable to expect. If a deal is too sweet to be expected to last you don't get into it and start crying about it being revoked later.