On the 3rd December 2015, the EU Commission called time yet again on EU Member States enticing multinationals to become resident through favourable tax treatments. It announced a public investigation into a multinational burger bar’s tax treatment by the state of Luxembourg, under the suspicion that Luxembourg was affording the multinational unlawful state aid through the favourable treatment.

This investigation comes hot on the heels of similar recent investigations by the Commission into a multinational coffee chain in Holland and car company in Luxembourg, sending a signal across Europe that such favourable treatments must end.

A tax ruling can be anti-competitive and breach Article 107(1) of the TFEU if the state affords a company or a group of companies a particular advantage that threatens to distort competition between EU Member States. In the present case, the Commission are examining two 2009 tax decisions by the Luxembourg tax authority, to see whether they breach the US-Luxembourg Double Taxation Treaty and confirm whether the treatment does grant an unlawful advantage.

The Commission’s preliminary concern is that due to the tax rulings, the multinational has not paid corporate tax in Luxembourg since 2009, despite European profits of around €250m in 2013. This was based on the fact that the profits would be taxed in the US under the Double Taxation Treaty, but due to the alleged accounting practices, no technical profit was made in the US subsidiary and therefore the multinational paid no corporation tax on these profits.

Regardless of the recent investigations by the Commission, tax treatments saving many millions and blessed by national governments, may be too strong an incentive for many multinationals to ever bring an end to these alleged practices.