As long as taxes exist, people will try their best to pay as little as legally possible. This is even truer for companies, where taxes can eat into funds that would otherwise be profits. The issue of tax shelters and ways around the system for companies has been a big focus of the 2016 primary debates in America, in particular on the Democratic side. Recent news out of Europe shows this is not just an issue isolated to America.
A tax loophole was recently closed by the European Commission in Belgium, resulting in approximately 700 million Euros having to be paid by multinational companies. Previously, there was an “excess profit” tax policy in place within Belgium, which gave multinational companies a tax break based on the notion that a smaller company would not have made that level of profit. With this rule being reversed, Belgium will need to recover the tax revenue that was lost. Perhaps more importantly, the reversal will impact business in Belgium moving forward. The ruling is not without merit; it’s estimated that the tax break allowed some companies to keep 50%-90% of their profits tax free.
For its part, the Belgian government said this ruling was expected, but they may appeal the decision in court. It’ll be interesting to see how this is handled moving forward in terms of laws, and what impact it will have on their local economy. It’s estimated that most of the companies affected were from Europe, with at least 35 being asked to repay their part of the lost tax amounts.