The decision by Europe’s competition czar to launch a probe into French utility Engie on Monday was quintessential Margrethe Vestager.
Its announcement coincided with her arrival in the U.S. to meet with reporters and face accusations from the American administration and lawmakers that her services single out U.S. firms for harsh treatment.
Vestager needed a powerful counter example, and Engie, a giant French utility that is close to political power, was the perfect option.
If Vestager, who arrived in Brussels from Denmark with a reputation for being a master of political communication, was worried about entering hostile territory in Washington, she came armed.
“Just today, we opened an in-depth investigation into Luxembourg’s tax treatment of the French electric utility company GDF Suez group — now known as Engie,” she told reporters. The Commission suspects Engie’s tax deals with Luxembourg have allowed the firm to avoid taxes on a “significant” share of its profits.
Vestager started off Monday’s press conference taking a photo with her phone — an iPhone.
The announcement juxtaposes with her controversial August 30 decision ordering Apple to pay Ireland €13 billion in back taxes plus interest. Washington was already sore over Vestager’s probes into Google, Amazon and Qualcomm, let alone wider reforms aiming at tightening regulation of the big U.S. tech giants.
Vestager started off Monday’s press conference with a smile, taking a photo of gathered reporters from the podium at the European Union delegation with her phone — an iPhone. She added afterwards that it’s an old model, given how hard it is to find an iPhone 7 in Europe.
A spokesperson for the European Commission rejected any suggestion that the news was timed to coincide with her trip. “We take decisions when we are ready to take them,” spokesman Ricardo Cardoso said.
Yet this isn’t the first time that Vestager appears to have timed a decision with an eye to her or the Commission’s wider political agenda. In April 2015, she announced charges against Google one week and against Russian energy giant Gazprom the next. The message: Google is not the only national champion being pursued by Vestager’s officials.
Apple CEO Tim Cook | Josh Edelson/AFP via Getty Images
She made a similar pairing last October, when announcing a controversial decision that tax deals enjoyed by Fiat and Starbucks amounted to illegal state aid. She ordered the European and American companies to reimburse up to €30 million each.
“She is exceptionally good at making the best of her agenda,” said Jacques Lafitte, founder of Avisa, a consultancy — but also at explaining her decisions and engaging with her audience.
At the press conference, she immediately defended her agency’s use of state aid rules to maintain a level playing field in Europe.
“Europe is open for business, but not for tax evasion,” Vestager said, noting that “we have a different history in the U.S. and Europe and we do not always see things the same way, to put it mildly.”
“You cannot find the statistics to back up any kind of [anti-U.S.] bias,” she said, reminding reporters that it was a U.S. Senate subcommittee that originally investigated tax avoidance by Apple.
She dismissed a letter last week from the Business Roundtable pushing European national leaders to “overturn” the Apple ruling and warning about a downturn in foreign investment in Europe as a result of the Apple verdict.
A ruling cannot be overturned by the Commission or EU leaders after it’s been issued — it can only be appealed in the European Court of Justice, as Ireland is doing, she noted.
She added that “the reasons to invest in Europe just pile up.”
Vestager’s bombshell Apple ruling has sparked a complicated set of reactions in Washington. The Commission found that on one hand, U.S. Treasury officials and many top lawmakers consider the decision a blatant grab for power and tax revenue by Brussels at the expense of Washington and an American tech giant — and are complaining on behalf of Apple and other U.S. corporations.
Yet Vestager’s decision — that Apple’s tax arrangement with Ireland violated EU state aid rules that seek to keep a level playing field within the bloc — has also served as something of a clarifying moment over the lack of action by Congress on corporate tax reform. While there are few signs of a breakthrough in the long-moribund debate over lowering the corporate tax rate, closing loopholes and bringing home the billions in U.S. corporate revenues currently parked overseas, some officials clearly see Vestager’s move as a possible opening.
“We are not trying to become and are not now a tax authority” — Margrethe Vestager
Treasury Secretary Jacob Lew said as much in a Wall Street Journal op-ed last week, writing that while he views Vestager’s €13 billion decision as possibly bogus and bad for business in Europe, “it also has highlighted the urgent need for comprehensive business tax reform. To be clear, the U.S. Treasury agrees with the Commission that there is a serious problem with tax avoidance around the world.”
It’s no accident that along with Lew and top House and Senate tax-writers, Vestager is meeting Tuesday with influential Wall Street critic (and newfound Hillary Clinton surrogate) Senator Elizabeth Warren, who wrote in the New York Times on September 8 that the Commission’s Apple ruling “was the latest sign that multinational corporations are running out of places to hide from paying taxes. The door is now open for Congress to fix our own corporate tax code, which has allowed the biggest multinationals to shirk their obligations for decades.”
Senate tax-writers have been raising concerns for months about the European Commission’s investigations into U.S. companies, and have discussed with the Treasury whether it might use a never-invoked retaliatory tax, found in Section 891 of the federal tax code, against European companies.
There’s been no serious discussion of invoking the provision since the Apple ruling.
Amid concerns from Ireland and other smaller EU countries that the Commission is overreaching, Vestager stressed that “it is completely up to member state to set their corporate tax level.”
“We are not trying to become and are not now a tax authority,” she said.