European Commission Refers Greece to Court

February 25, 2010 Taxation in EUTaxation in Greece

European flags flying in front of the BerlaymontGreece has been referred to the Court of Justice of the European Union, after the European Commission (EC) deemed a series of tax exemptions issued by the jurisdiction to be illegal.

On February 24th the EC released a statement referring Greece to the EU Court of Justice for breaking clauses within the Treaty on the Functioning of the European Union (TFEU). The EC claims that Greece broke EU legislations when it failed to comply with a decision passed by the Commission in July 2007, which ordered Greece to recover funds issued to businesses under the national tax exemptions.

The provision within the Greek national tax legislation, which was examined by the EC, allowed for businesses to deduct 35 percent from their taxable income, on the condition that the benefits would be used to fund new projects like: expansions, employee training, and new technological and equipment purchases. Originally, the exemption was passed by the Greek Government without prior consent or consultation with the European Commission. However, in 2007 the measure was deemed to be non-compliant with EU law, and Greece was instructed to retrieve any exemption funds it had already issued, and to also seek interest from the recipients. According to the European Commission, the Greek Government is yet to provide any evidence that it has complied with the 2007 decision.

Commenting on the necessity of pursuing legal actions against the Greece’s tax exemption Joaquín Almunia, European Commission Competition Commissioner, said : “…the recovery of illegal aid is about restoring a level playing field in the Single Market. The Commission is determined to take all necessary steps to ensure that Member States comply with their recovery obligations.”

Photo by TPCOM