Brussels, January 11

The European Union today closed a major tax break that Belgium offered to multinationals, reportedly including beer giant AB InBev and British American Tobacco, and ordered the companies to return 700 million euros ($762 million) in unpaid taxes.

In the latest Brussels crackdown on tax avoidance, it ruled that the benefit to some 35 multinational companies was illegal and breached the EU’s rules on state aid to companies.

It comes in the wake of the ‘Luxleaks’ scandal, which revealed details of tax breaks given to dozens of major firms in Luxembourg when current European Commission Head Jean-Claude Juncker was prime minister.

“The European Commission has concluded that selective tax advantages granted by Belgium under its ‘excess profit’ tax scheme are illegal under EU state aid rules,” Competition Commissioner Margrethe Vestager told a news conference.

“Belgium has given a select number of multinationals substantial tax advantages that break EU state aid rules. It distorts competition on the merits by putting smaller competitors who are not multinational on an unequal footing,” Vestager said.

She did not name the companies but reports said targets included Stella Artois brewer AB InBev which is undergoing an $121-billion buyout of rival SABMiller.

Seeing AB InBev use the tie-up as an opportunity to leave Belgium for lighter taxes elsewhere has been a major concern in Brussels.

Belgian Finance Minister Johan Van Overtveldt said he had expected the decision and therefore suspended tax break to new companies as soon as the EU probe began in February.

“At this point we do not exclude any option. This also applies to the possibility of an appeal against the decision,” the minister said in a statement sent to AFP.

The European Union has also launched investigations into other countries’ tax deals: US tech giant Apple’s deals with Ireland, coffee-shop chain Starbucks with The Netherlands and McDonald’s with Luxembourg.

In October, the Commission decided that Luxembourg and the Netherlands have granted unfair tax advantages to Fiat and Starbucks, respectively, and ordered the firms to repay some taxes. EU rules say some tax breaks offered to big companies breach the bloc’s rules on state aid, as they amount to a government subsidy that is aimed at attracting multinationals to do business in certain countries.

The deals are not illegal and critics say the EU has been unfairly targeting US companies.

But Vestager said that in the Belgium case, 500 of the 700 million euros in avoided taxes were owed by European companies.

Belgium’s system, dubbed ‘Only in Belgium’, allows companies to reduce tax by registering ‘excess profits’ that allegedly result from the advantage of being part of a multinational group.