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EDF Must Return $1.5 Billion French Tax Subsidy
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Due to an erroneous tax exemption in 1997, Electricite de France SA must repay over one billion euros it improperly received.

Summary: Due to an erroneous tax exemption in 1997, Electricite de France SA must repay over one billion euros it improperly received.

According to Bloomberg, Electricite de France SA must repay 1.37 billion euros to French authorities, due to an unfair tax exemption it received in 1997. The decision comes as the European Union’s competition regulator has begun cracking down on corporate tax loopholes.


After the announcement was made, EDF’s shares dropped by as much as 2.8 percent in Paris trading.

New SEC rules will impact clawback laws in the United States.

The decision to claw back the aid is just the latest event in dealings with the EDF. Initially, an investigation was launched over ten years ago, according to the Wall Street Journal. The case was reopened two years ago after the EU’s highest court faulted the commission for its previous handling of the probe. Now, the competition regulator wants to expose the tax affairs of multinationals, as it has already begun investigating the tax arrangements of a Fiat SpA unit and Amazon Inc. in Luxembourg, Starbucks in the Netherlands, and Apple Inc. in Ireland. According to Politico, Apple has stated that any repayment order may have a “material” effect on its balance sheet.

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France has recently agreed to recognize children born to surrogates overseas.

Competition Commissioner Margrethe Vestager said, “Whether private or public, large or small, any undertaking operating in the single market must pay its fair share of corporation tax.”

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The decision will increase EDF’s debt by around 900 million euros in the second half of 2015. EDF will repay the ordered amount, but says it “denies the existence of unlawful state aid” and has appealed the decision.

In 2013, France approved a 75% income tax for salaries in excess of 1 million euros.

In 1997, France did not levy all corporation tax payable by EDF. At this time, certain accounting provisions were classified as capital. This exception gave EDF an unfair economic advantage, as well as benefits in competition.

France’s Economy Minister, Emmanuel Macron, said that the company will not be “weakened” by the reimbursement because it makes enough profits.

The French government owns 84 percent of EDF. It is still the top power producer and distributer in the country, even after the market was opened to competitors in 2007.

EDF operates 58 nuclear reactors. Since 2007, it has been forced to sell part of its output from these generators to competitors, but this has not damaged its market share.

Source: Bloomberg

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