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Brussels probes multinationals’ tax deals

Alex Barker, Jamie Smyth and Matt Steinglass
Adam Jeffery | CNBC

Brussels is probing Ireland, Luxembourg and the Netherlands over their tax deals with multinationals paving the way potentially for a formal investigation into illegal sweeteners.

Europe's top competition authority has asked the governments to explain their system of tax rulings and give details of assurances given to several specific companies – including Apple and Starbucks – according to people who have seen the request.

(Read more: EU lawyers say transaction tax plan is illegal)

The move threatens to open a new front in the global clampdown on tax evasion through enforcing the EU's state aid rules – a unique regime that bans serious distortions of competition through tax breaks to favoured private groups.

This request, sent to at least three EU countries, represents the opening step of an informal probe and does not mean the European Commission has identified wrongdoing. But even this preliminary move has rattled officials in some of the capitals targeted.

EU Leaders Battle Over Tax Avoidance

Should the Commission find cause for concern, it will open a formal investigation and start a process that could force the states to recoup all the lost revenues from any unlawful sweetheart deals. A Commission spokesperson said: "At the moment, we are simply gathering information on tax rulings."

The Hague, Dublin and Luxembourg have all been forced to combat claims that they are acting as tax havens, giving big corporations a base to reduce their tax bill worldwide. The rulings under scrutiny give assurances to companies – sometimes in advance of a decision to relocate – over how their tax affairs will be treated.

The government in Luxembourg declined to comment. The Irish Ministry of Finance said it was not aware of a formal EU state aid inquiry but said it received queries from the Commission "from time to time" on a range of issues including tax.

(Read more: Ireland says not to blame for Apple's low tax rate)

A U.S. Senate committee recently singled out Ireland for acting as a conduit for Apple's earnings so it could sidestep large tax payments around the world. The report claimed Dublin allowed Apple to apply a corporation tax of 2 percent or less, well short of the usual 12.5 percent rate. Ireland strongly rejects allegations of a "special deal".

Starbucks, meanwhile, came under fire last year in Britain for allegedly slashing its UK tax bill by vesting its intellectual property in its Dutch subsidiary, which then charged hefty royalties to its other subsidiaries, allowing the British unit to show little or no taxable profit.

More from the Financial Times:

Looking into sweetheart tax deals
Global crackdown on tax avoidance
G20 leaders add pressure on tax avoidance

In parliamentary hearings, Starbucks claimed it could not reveal whether its Dutch tax ruling involved a tax break because of confidentiality rules. The Dutch government says this is false, and that while its tax authority is bound by confidentiality, Starbucks is free to make the ruling public if it wishes.

Although many tax authorities make upfront agreements with companies on how their revenues will be treated, Luxembourg has faced criticism for going further than most. Companies often pay very low tax rates in spite of a relatively high corporate tax rate of 29 percent.

(Read more: Backlash as Starbucks UK tax avoidance revealed)

The EU questionnaire lands at a sensitive political moment for The Hague. The Dutch parliament's finance committee is holding a hearing on Thursday on the country's "letterbox companies", shell companies that multinationals establish in the Netherlands to exploit financial advantages including the tax rulings.

In a bid to assuage critics, the Dutch government this month unveiled a tax avoidance crackdown that included a promise to share proactively tax rulings with other national authorities, especially when companies may not qualify for tax cuts under bilateral treaties.