The European Commission concluded last week that the Madeira Free Trade Zone (ZFM) regime violated state aid rules, as it included companies that did not contribute to the development of the region, and in view of this Portugal must recover the support provided. Following an in-depth investigation launched in 2018, the community executive announced today that he had concluded that “the implementation of Regime III of the Madeira Free Zone in Portugal does not comply with the Commission’s State aid decisions” as “the objective of the approved measure was to contribute to the development of the outermost region of Madeira through tax incentives,” aimed exclusively at companies that create jobs within the region, but which is not happening.
Stressing that these conclusions do not question the status of the outermost region of Madeira or its eligibility for regional aid, the European Commission points out that its investigation “revealed that tax cuts were applied to companies that did not represent any added value to the development of the region,” having previously created jobs outside Madeira “and even outside the EU,” in “disregard of the conditions of European state aid decisions and rules”.
Therefore, Portugal must now recover all “undue aid, plus interest, from these companies,” as determined by the Commission who have not released any official figures.
The President of the Regional Government, reacted to the news of the report by initially saying that there was always strong competition from other financial markets, such as Luxembourg, Holland, London and Cyprus, and that there has always been a “a set of lobbyists campaigning against the creation of the Madeira Free Trade Zone.” He went on to say that the ZFM both directly and indirectly supports six thousand jobs, generating an income of 120 million euros per year. Therefore, it is essential for the island’s development. The President went on to criticise those “crazy people who want to take on great responsibilities at national level” who have not yet realised that the International Business Centre is supervised and audited by the EU and other entities. Furthermore, if there have been any irregularities, these will be corrected.
Ana Gomes, who triggered the investigation on the International Business Centre of Madeira, later stated that she was satisfied with the result of the European Commission report, which states that the Madeira Free Zone will not have generated real employment and that the State European aid should be returned.
While in Madeira on a two-day pre-campaign, as she presents her candidacy for the presidency of the Republic, she clarified that she is in favour of the existence of the ZFM, but does not agree with the “illegal schemes practiced under the cover of the Madeira Free Trade Zone.” In fact, in statements made to journalist she reiterated that she believes in the ZFM but not as “the cancer” it has become. It should employ “a system of tax incentives that takes into account the constraints of an autonomous region like Madeira, provided that it serves to foster real economic activity, produce profits and real jobs here on the island, instead of “fraudulent and fictional jobs, that potentially can be used as a front for money laundering, or organised crime.”
Criticizing regional officials, namely the PSD Government and nationals, who facilitated a diversion of resources that should be at the service of the people of Madeira and Portugal, Ana Gomes said she hoped that the report issued by the EU would correct these situations. The former MEP, elected by the PS, also accused anyone who took advantage of the ZFM to “enrich themselves by embezzling money that should have been at the service of the people of Madeira.” Confronted with those who argue that the ZFM tax expenditure is “technical” since it allows companies to be established in Madeira and not in other places, Ana Gomes said that “this is the so-called excuse of the bad payer”.
She further expressed her “pride and honour” for having drawn the attention of European bodies to the ZFM, in February 2017.