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Brussels, 4 June 2008

State aid: Commission prohibits tax exemptions of almost €3 million to Alas Slovakia

The European Commission has decided under EC Treaty state aid rules not to authorise regional investment aid in the form of tax exemptions that could amount to around €2.9 million in favour of Alas Slovakia s.r.o. The Commission's in depth investigation, launched in December 2007, concluded that the proposed aid would not sufficiently contribute to regional development as to justify the distortions of competition that the granting of a selective advantage to a large company would have brought about. Neither the Slovak authorities, nor any other interested party, responded to the doubts expressed by the Commission during its in-depth investigation. A negative decision was therefore inevitable. As the aid has not yet been granted, it is not necessary to order the recovery of the aid.

Competition Commissioner Neelie Kroes said: “The Commission has to take a strict line on aid which distorts competition without significantly contributing to regional development. As the Slovak Government did not respond to the investigation, the Commission had no option but to conclude that its original doubts were justified".

On 11 December 2007 the Commission opened a formal investigation as it had doubts on the compatibility of the aid with the applicable 1998 EU Guidelines on national regional aid. The 1998 regional guidelines allow state support for individual projects in certain disadvantaged regions, provided that the aid attracts new investment to these regions and that the distortion of competition and trade brought about by the aid is outweighed by its positive contribution to regional development (e.g. job creation). Moreover, as a general rule, regional aid should be granted under multi-sectoral aid schemes which are part of a regional development strategy with clearly defined objectives.

In this case the Slovak authorities planned to grant individual ad hoc aid to a single firm, Alas Slovakia, active in the extraction and processing of gravel and stone. It is the responsibility of the Member State to demonstrate that the project contributes to a coherent regional development strategy and that, having regard to the nature and size of the project; it will not result in unacceptable distortions of competition.

The Commission's initial investigation revealed that the aid would support activities in the extraction industry, where the location of sites is determined by the availability of natural resources. Alas is already operating in most of the establishments relevant to its activity on the basis of long-term licences. Consequently, it was likely that the investment would take place even in the absence of the aid (i.e. no incentive effect) and that the aid would not contribute to regional development. Moreover, the Commission questioned whether the very limited number of new jobs directly created could justify an aid which amounts to about seven years of wages per worker recruited. As a consequence, the Commission concluded that the expected contribution of the aid to regional development is outweighed by its negative effect on trade within the Single Market.

As neither the Slovak authorities, nor any third parties submitted comments during the in-depth investigation, the Commission could only confirm its initial doubts as expressed in its decision to open the formal investigation procedure.

The non-confidential version of the decision will be made available under the case number C 57/2007 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News

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