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EU sues France over illegal France Telecom aid

The mother of all tax breaks

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The European Commission is taking France to court for failing to claw back illegal state aid granted to France Telecom in 2002.

In August 2004, the Commission ruled that the French government had handed its favourite telco a hidden subsidy worth between €798m and €1140m. This was disguised through preferential tax treatment doled out to France Telecom between 1994 and 2002.

The EU ordered France to recover the difference between the "amount that France Telecom would have had to pay if the normal business tax law had been applied and the amount of business tax actually paid by France Télécom".

But in a statement today, the Commission said:

France has rejected all of the Commission’s proposals and has not submitted any alternative proposal acceptable to the Commission for calculating the amount of aid to be recovered. In addition, almost two years after the decision, France has not yet taken any concrete measures to recover the aid. The Commission has therefore decided to initiate a state aid infringement procedure (Article 88(2) EC Treaty) against France before the Court of Justice for failure to execute its recovery obligation.

France Telecom went to the European Court of First Instance in February 2005 to appeal the EU ruling. Today’s announcement marks the EU’s response. The venue for the slugfest will be the European Court of Justice in Luxembourg., the highest court in EU-dom. ®

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