German pharma companies may have to repay tax break
The European Commission has opened a formal ‘state aid’ inquiry into these tax reductions
German pharmaceutical companies facing financial difficulties may have to repay a special tax break designed to help them from going out of business, courtesy of the European Commission (EC).
The EC has opened a formal ‘state aid’ inquiry into these tax reductions. Brussels fears that they break European Union (EU) government subsidy rules designed to prevent EU governments from giving unfair assistance to local companies operating in the borderless EU market.
If the EU concludes that this is so, it could order companies who benefited to pay these taxes.
The exemptions are available to German pharma companies in financial difficulties and waive payments they are usually obliged to pay to German public sickness funds and private health insurers. They amount to 16% of income earned from certain prescription medicines payable between August 2010 and December 2013.
The EC said its probe followed a complaint about these exemptions from a German pharmaceutical company. Brussels has particular concerns that because the tax breaks are ‘neither limited in time, nor granted on the basis of a restructuring plan’, they could ensure that ‘ailing companies are kept artificially alive with public subsidies to the detriment of more efficient competitors’. This would break EU state aid rules, which are designed to ensure that this does not happen.