EC Releases Letter about Engie 'Tax Loopholes'

The European Commission (EC) has published the letter in full sent four months ago to Luxembourg requiring more disclosures of its secret tax deals with French utility giant Engie. Its disclosure may suggest it feels it is getting insufficient co-operation from that government.

The EC’s competition directorate at the time expressed concern then that several Luxembourg tax rulings may have given Engie an unfair advantage over other companies, in breach of EU state aid rules, and may not even have been available to other firms operating in Luxembourg.  

The 50-page letter is highly technical, but for the first time expands on how Luxembourg provided two tax ruling approvals concerning interest-free mandatorily convertible loans, denominated as “GSTM ZORA” and the “LNG ZORA”, that the EC considers as tax avoidance schemes.

Para 52 of the letter says how, according to a 2012 GSTM ZORA tax ruling request, Engie (then called GDF Suez) was planning massively to increase the two ZORAs “in the near future” in the years following 2012 from an initial €0.8bn–€1.2bn to a sum between €7bn-€12bn and €37bn-€42bn. However the letter is less about whether and to what extent this increase actually happened. 

This illustration, released in September, is how the EC views Luxembourg's tax treatment of Engie (Graphic credit: EC)

The LNG ZORA scheme was originally structured for the sale of Engie’s Swiss-based LNG trading business to two new taxable Luxembourg companies in or around 2008.

The Luxembourg government in response said January 5: “This opening decision has today been published. The publication itself is a mere formal step in the procedure. The text published [by the EC] contains no new elements. Luxembourg has submitted all requested information to the Commission and is fully cooperating with the Commission in the investigation.” 

There was no related statement on Engie's website early on January 5. However in response to a request from NGW, the company stated: "Engie will provide its comments to the European Commission and the Luxembourg State in the coming months and will not make any further public statement."

The published 50-page letter to Luxembourg, dated September 19 2016, from EC competition commissioner Margrethe Vestager is available here. 

Mark Smedley