EU tells Spain: Take back company tax breaks

The EU's anti-trust regulator ordered Madrid on Wednesday to recover tax breaks given to some of Spain's biggest companies to spur foreign acquisitions.

EU tells Spain: Take back company tax breaks
Telecoms giant Telefonica is said to have received several billions of euros in tax breaks which it must now pay back. Photo: Dominique Faget/AFP

Phone group Telefonica, banking giant Santander or energy group Iberdrola were among the companies which benefited from the tax break, fuelling the purchases about a decade ago.

According to Spanish newspaper El Pais, these tax breaks amounted to tens of millions of euros and even several billions of euros in the case of Telefonica.

The European Commission said the scheme amounted to illegal state aid as it benefited Spanish corporate buyers at the expense of rivals considering to acquire the same targeted company.

At the height of use of the tax breaks, and before the eurozone crisis plunged Spain into economic depression, Telefonica bought British rival O2 in a blockbuster deal, and Iberdrola snapped up Scottish Power.

The commission opened an official probe in 2007, asking Spain to cancel the measure immediately, which it did though without recovering the credits allowed up to that point.

In 2012, Spain unveiled a new version of the tax law, and it was this interpretation that EU regulators rejected on Wednesday.

With the decision, beneficiaries of the tax break "must repay the Spanish state," the commission said in a statement, without naming the companies or amounts.

"We are not in a position to give the amounts involved, and we await that information from the Spanish tax authorities," said Antoine Colombani, a spokesman for Competition Commissioner Joaquin Almunia.

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There are still 16,000 public telephones in Spain

Spain has a law to provide at least one payphone for every 3,000 inhabitants, even though an average of one call a day is made from them.

There are still 16,000 public telephones in Spain
Photo: pawpopa3336/Depositphotos

New data reveals that Spain currently has over 16,000 public payphone dotted around the length of breadth of Spain even though an average of one call a day is made from them.

Telefonica sources cited by news agency Efe revealed that Spain's biggest telecommunications company currently spends €4.52 million a year maintaining the phone booths.

Despite the fact that they are rarely used, Telefonica is tied to a “universal service obligation” imposed by the government to provide and maintain in working order a public payphone for every 3,000 inhabitants in each town of 1,000 or more and one cabin in all municipalities of less than 1,000 inhabitants.

The company estimates that of the 16,000 currently in use, half are almost never used and 12,000 ceased to be profitable years ago, losing the company some €3 million  a year.

The number of payphones has been vastly reduced since the  introduction of mobile phones. Twenty years ago there were almost four times as many payphones across Spain  –  55,000 payphones available in 1999 – and you could expect to find one on many a street corner.

Spain's communications regulator CNMC has called on the government to drop the universal service obligation for public payphones after a recent survey found that nearly 9 in 10 Spaniards (88 percent) admitted to never having used a public payphone in their life.

When was the last time you used one?

READ ALSO: Could technology be killing off Spain's sociable mealtimes?