Belgian tax scheme under fire

The European Commission has taken the finance ministers' council to the European Court of Justice in a long-running case involving a preferential Belgian tax regime for company headquarters, daily paper, Le Soir has reported, citing the commission.

It has said the commission regards a decision by the Ecofin council to allow the Belgian tax regime to continue as illegal and that it encroaches on its authority to decide on state aid issues.

The Belgian law in question was passed in 1982 and allows Belgium multinational companies to be taxed on their operating costs rather than their revenue.

The commission clamped down on the scheme in 1998, saying that it was a case of tax competition between EU member states.

In January, the Ecofin council decided to allow preferential tax schemes in five countries - including Belgium's corporate headquarters tax - until 2010 as part of a compromise deal on the taxation on EU citizens' savings.

According to the paper, the commission has since then demanded that Belgium terminate the preferential tax scheme still in place for 36 companies whose agreements with the government expired after Feb 17, 2003.

It said the 15 finance ministers yesterday upheld Belgium's view, allowing these companies to benefit from the scheme until 2005.

In yesterday's complaint to the European Court, the commission said: "A decision by the (Ecofin) council relating to aid for which the commission has already legislated is an attack on the institutional balance of powers."