The European Commission ordered Greece on Friday to immediately stop giving a tax break that allows corporations in several sectors to deduct up to 35 percent of their profits from their taxes. The Commission said the tax break is an illegal state subsidy to business, as it gives Greek companies an unfair advantage over European competitors.
The order marks the first time the Commission has required a European Union country to suspend immediately a state aid scheme. In most cases, the Commission reviews the scheme before making a decision, according to the AP.
"This measure was never notified to the Commission and is therefore illegal," the Commission said in a statement.
"Such a suspension is justified in this case, given the continuous use of this measure by Greece and the increasing distortion of competition in the single market," the statement said.
The tax break applies to a broad range of Greek businesses, including those active in the production of textiles and basic metals, automobile manufacturing, energy production, mining, farming and fishing, international trade and tourism.
Under Greek law, companies must use their tax exempt income to finance expenses such as the construction, expansion and modernization of plants and buildings, the purchase of new equipment or vehicles, and environmentally-motivated investments.
The Commission said it would continue to investigate the tax break, but said it doubts the aid is compatible with EU rules because of the "serious risk that it will distort competition and affect trade between EU countries."