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EUs Vestager examines Facebook for potential tax probe

EU competition chief Margrethe Vestager is weighing up whether there are grounds to open a probe into Facebooks European tax arrangements as she deepens her multinational investigation into sweetheart tax deals, two people close to the case said Wednesday.

Countries giving preferential tax deals to big companies — particularly in the tech sector — have been a European Commission priority since 2014, and Vestager ruled in 2016 that Ireland would have to claw back €13 billion in unpaid taxes from Apple. In a novel crackdown against tax avoidance, the EU has started to treat preferential tax arrangements as a form of state aid — essentially declaring that countries are giving illegal subsidies to businesses.

In her state aid rulings to date, Vestager has also demanded that Luxembourg claw back large sums of unpaid taxes from the U.S. retailer Amazon and the French energy giant Engie.

Vestager stresses that her work on tax is unfinished, and two people close to the work of the competition investigators said that they had now turned their attention to Facebooks arrangements. A third person agreed that the Commission was looking into these, but predicted that Vestagers team would not find enough to open a formal investigation into the social networking giant.

A former Irish civil servant told POLITICO that Vestagers team seized documents relating to Facebooks tax arrangements in Ireland — as well as those of other companies — as part of a dossier trawl dating from the Apple investigation.

The United States has also launched a probe into Facebooks tax activities.

At a press conference at the Web Summit in Lisbon on Wednesday, Vestager was asked whether her department was specifically looking into an Irish arrangement that allows investors to lower their tax burden by offsetting costs from intellectual property assets they have acquired.

“We continue to ask questions. Were asking member states for evidence of tax rulings about specific cases,” she said. “So far, we have no specific criticism of any legislation from the Irish Republic.”

An official from the Irish finance ministry confirmed that “the European Commission has been gathering information from all EU member states on tax rulings since 2014,” and had examined over 1,000 rulings across Europe, but stressed that this had not been “limited to Ireland.”

When asked about Facebook, the Irish spokesman said he is not at liberty to discuss the details of specific companies.

He also declined to answer questions about the specific IP write-off scheme that Ireland had in place to reduce the tax burden for holders of intangible know-how.

The core of any state aid case requires establishing that the arrangements that governments allow are selective toward a certain company or sector, and offer perks that other businesses would not ordinarily enjoy.

A spokesman for the European Commission declined to comment.

Facebook also declined to comment.

The company announced late last year, however, that it would change how it pays tax on its global operations, in a move that may result in the company contributing more to national budgets across Europe and farther afield.

Changes in behavior are often immaterial to state aid cases, which zero in on unpaid sums over certain periods in the past.

Nicholas Vinocur, Simon Marks and Mark Scott contributed reporting.

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