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EU probes French gas giant Engie’s Luxembourg tax deals

The EU launched an in-depth probe Monday into alleged sweetheart tax deals between French gas group Engie and Luxembourg, taking on a major European multinational after similar high-profile investigations into US giants.

The probe into a company owned in part by the French state comes days after the Commission angered Washington by ruling that US tech icon Apple had received favourable tax terms and ordered it to repay 13 billion euros ($14.5 billion) in back-taxes to Ireland.

“The Commission has concerns that several tax rulings issued by Luxembourg may have given GDF Suez (now Engie) an unfair advantage over other companies, in breach of EU state aid rules,” the European Union’s executive arm said in a statement.

The investigation into one of France’s biggest and most strategic companies opens on the same day as a visit by EU Competition Commissioner Margrethe Vestager to Washington, where she is to meet top US officials amid continued complaints over her Apple decision.

“We will look carefully at tax rulings issued by Luxembourg to GDF Suez,” Vestager said in the Commission statement.

“They seem to contradict national taxation rules and allow GDF Suez to pay less tax than other companies,” she added.

The Commission said Luxembourg is suspected of having afforded Engie subsidiaries different tax treatments on the same transactions, lowering the company’s overall tax exposure significantly.

Luxembourg’s tax authorities “appear to treat the same financial transaction between companies of GDF Suez in an inconsistent way,” the Commission said.

This resulted in tax breaks “which are not available to other companies subject to the same national taxation rules in Luxembourg,” it added.

– LuxLeaks fallout –

The Luxembourg government rejected the charge but said it would cooperate fully with the probe and stressed that an investigation in no way presumed guilt.

“Luxembourg believes that no special tax treatment was accorded to Engie companies in the country,” the finance ministry said in a short statement.

Engie also said it would cooperate with the probe.

Luxembourg has been under intense scrutiny since the LuxLeaks revelations in 2014 showed that current European Commission President Jean-Claude Juncker gave companies huge tax breaks, known as tax rulings, while he was prime minister of the tiny country.

Documents leaked to journalists by former PricewaterhouseCoopers employees revealed tax breaks that Luxembourg offered to huge international firms including Apple, IKEA and Pepsi.

The revelations, along with the Panama Papers scandal this year, ended up forcing the EU to take urgent steps to stop global firms avoiding tax in Europe, including inquiries into firms like Apple, McDonald’s and Amazon.

In addition to the historic decision against Apple, the Commission has already decided against Fiat in Luxembourg, and Starbucks in the Netherlands, ordering them to repay up to 30 million euros.

Decisions are still awaited against Amazon and McDonalds as well as on a special tax set-up given by Belgium to a number of multinationals, including brewing giant AB Inbev.

The Engie cases cited by the Commission on Monday date back to 2008 when Juncker was at the helm in Luxembourg.

GDF Suez, Engie since 2015, is a French electric utility company of which the French state owns about 33 percent.

During her three-day visit to the US, Vestager is set to meet Treasury Secretary Jacob Lew, in addition to key lawmakers and regulators.

A Commission spokesman rejected criticism that the decision against Engie was taken to assure Washington that US companies are not under attack in Brussels.

“We take decisions as soon as we are ready to take them, there’s nothing else to add to that,” European Commission spokesman Ricardo Cardoso told a news briefing.