France Telecom in the merde

The French – or more precisly, the part state-owned France Telecom - are back in the merde with the EU commission. The commission is demanding that it pays back taxes to the French government, amounting to between 800 million (990 million dollars) and 1.1 billion euros plus interest.

Between 1994 and 2002, France Telecom benefited from special tax conditions (the so-called taxe professionnelle) which allowed the group to reduce its tax liability.

In addition to being let off taxes, the commission also claims the company had also received further aid in the form of verbal support from the government and a credit line of nine billion euros which the French state had made available to the beleaguered operator. However, since the money was not drawn down, no repayment is being required.

Competition Kommissar Mario Monti said that the aid was incompatible with EU competition rules."

Far from being chastened, however, France Telecom has hits back in a wonderfully robust Gallic style, stating in a hastily issued press release that the commission appeared "to have made its decision without precision, in a climate of confusion fuelled by many leaks, rumours and public announcements that have been premature to say the least."

"In reality", it continued, "today's decision lacks any economic or legal basis: France Telecom has not received any State aid". Its decisions:

contradict economic reality and amount to a serious violation of EU law. They endanger several principles essential to the common market's legal security, in particular the principle of neutrality between private and public property established by article 295 of the Treaty, the principle of prescription and the principle of legitimate expectation.

France Telecom, therefore, "will take all possible measures to protect the interests of the Group and its 1.4 million shareholders. As already indicated, France Telecom will refer the case to the Court of First Instance of Luxembourg to have the European Commission's decisions repealed."

The press release concludes that "France Telecom is pleased to note that, for its part, the French State has decided to appeal against the decisions taken today by the commission".

One has to admire the Gallic style, if not the substance. In this case, it is difficult to know who to root for.