About 35 multinational companies will have to pay back €700 million following a ruling by the European Union yesterday (11 January) to end tax breaks offered by the Belgian government.

Some of the companies said to be affected include AB InBev and British American Tobacco.

Belgium broke EU state aid rules

The ruling found that Belgium's "excess profit" tax scheme (dubbed 'Only in Belgium') do not comply with Brussels rules on state aid. It is part of the EU's crackdown on tax avoidance.

The 'fiscal incentive' scheme had been offered by Belgium since 2005 and enabled multinationals to reduce their tax bill on profits by as much as 90 per cent. Belgian Finance Minister Johan Van Overtveldt said the government ceased to offer the tax break to new companies when the EU opened its investigation in February 2015.

Clampdown on EU tax avoidance

It follows similar measures taken against tax breaks offered in the Netherlands, Ireland and Luxembourg (the latter dubbed the 'Luxleaks' scandal). Other companies affected so far include Starbucks, Amazon, Fiat and Apple. The EU is also investigating the tax arrangements of McDonald's. The tax schemes are said to distort competition by giving multinationals an unfair advantage over smaller companies, seeing as they can be taxed only on their 'hypothetical' profits, without taking into account the savings they make through economies of scale.

Distorting competition

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 merit by putting smaller competitors who are not multinational on an unequal footing.”

Van Overtveldt said that there is a possibility of Belgium appealing the ruling.

In the latest ruling, €500 million of the €700 million to be repaid will be owed by European companies.