EU probes Spain over foreign acquisition tax scheme

The European Union said Wednesday it was probing claims that a Spanish tax deduction scheme may have given Spanish companies an unfair advantage in the takeover of foreign businesses. The EU's executive arm, the European Commission (EC), said it had launched a formal investigation into a provision of the Spanish Corporate Tax Law that grants the country's companies tax breaks when acquiring non-Spanish concerns. "Many believe this scheme gives an advantage to Spanish companies buying foreign companies. Opening this investigation will let us find out whether these concerns are justified," Competition Commissioner Neelie Kroes said in a statement. The EC said it had decided to launch its probe after receiving a number of complaints over a wave of acquisitions of foreign concerns by Spanish companies. These include the takeover of British mobile phone operator O2 by Telefonica, of Scottish Power by Iberdrola, and bids by Sacyr, Albertis and Cintra to operate motorways in France. EU officials noted that the Spanish government had failed to notify Brussels about the scheme, which some argue may constitute incompatible state aid. If found guilty, Spain would be asked to recover the tax breaks it has granted. "We are talking about very large sums of money," an EU official said, declining to specify the exact amount. dpa nr ch