EU orders France Telecomreturn billion-euro tax break

20th July 2004, Comments 0 comments

STRASBOURG, July 20 (AFP) - The European Commission said Tuesday it was demanding that telecommunications operator France Telecom repay back taxes amounting to between EUR 800 million and EUR 1.1 billion plus interest to the French state.

STRASBOURG, July 20 (AFP) - The European Commission said Tuesday it was demanding that telecommunications operator France Telecom repay back taxes amounting to between EUR 800 million and EUR 1.1 billion plus interest to the French state.  

The commission, the European Union's executive arm, said the company had also received further aid in the form of verbal support from the government and a credit line of EUR 9 billion which the state had made available to the beleaguered operator.  

However, France Telecom will not have to repay the EUR 9 billion since the company had not used the credit line.

Concerning the verbal support, the commission also said no repayment need be made.   European Competition Commissioner Mario Monti said: "This decision shows that to be efficient and fair the control of state aid must capture the different modes, sometimes creative, with which a state supports companies through aid that is incompatible with European competition rules."  

France Telecom said it would appeal for the decision to be annulled, while the French government said it regretted that its arguments had not been taken into account and that it would explore all possible recourse.  

The commission found that between 1994 and 2002, France Telecom benefited from special tax conditions which allowed the group to reduce a tax bill that French tax authorities initially put at EUR 1.1 billion but have since told the commission amounted to EUR 800 million.  

Concerning the credit line, the commission said this had improved the financial situation for France Telecom "significantly" and put state resources at risk. "In effect, the credit line had been offered by a public entity," said the commission.  

The commission added that the credit line should be seen in the context of declarations made by the French government in July and December 2002. These declarations created confidence in the financial markets and kept the company's ratings at "investment grade", said the commission.  

According to the commission, no investor would have taken "a great financial risk" by offering the company a credit line without the French government declarations claiming that France Telecom would not be allowed to fail.  

However, since it was the first time the commission had dealt with this type of aid, it said it would not order that the aid be recovered.  

The commission said it had also dropped a complaint brought by rival mobile operator Bouygues Telecom which said France Telecom had favourable terms from the French government when third-generation UMTS mobile phone licences were granted.  

The case of France Telecom is one of a string of disputes between Paris and the commission over competition issues and state aid.

© AFP

Subject: French news

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