Brussels rules EDF benefited from illegal tax breaks

EDF is considering an appeal after being ordered to pay back €1.4bn to the French government, which Brussels says came from an illegal tax break.

The European Commission ruled that back in 1997, the Paris-based energy group received an individual, unjustified tax exemption of €889m that gave it a competitive advantage over its competitors.
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“Whether private or public, large or small, any undertaking operating in the single market must pay its fair share of corporation tax,” said Margrethe Vestager, who took over as the EU’s competition policy chief last year.

EDF has to pay €1.37bn in total back to the French state — roughly €200m more than it was originally billed. This includes the money from the 1997 tax exemption and another €488m of interest, said the EU executive in a statement on Wednesday.

The company, which is 84-per cent state owned, said that the EU’s decision would increase its net financial debt by about €900m in the second half of the year, but Emmanuel Macron, French economy minister, said: “This is not something that will weaken the (company’s) financial structure.”

EDF said that it “denies the existence of unlawful state aid” and is considering an appeal.

Back in 2012 the European Court of Justice annulled a previous decision by the commission to force EDF to give back the same €889m — plus around €335m in interest — to the French government. The commission reopened the case in 2013.

The statement outlining that decision to reopen asserts it was taken, "to verify, in accordance with the criteria laid down by the European Courts, whether France's tax revenue loss was economically justified from the point of view of a private investor in relation to EDF in similar circumstances. The Commission has now concluded that it was not, in particular because at the time the profitability that could reasonably be expected of such an investment was too low. It follows that the tax exemption granted to EDF cannot be considered an investment made on economic grounds."

"It is therefore State aid that has strengthened EDF's position to the detriment of its competitors, without furthering any objective of common interest. The aid is therefore incompatible with the single market and EDF must repay it to the French state. The amount in question is some €1.37 billion, of which €889 million is a tax exemption granted in 1997 and €488 million is interest (the exact amount will be calculated in cooperation with the French authorities)."

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