Friday

16th Nov 2018

EU takes aim at UK tax perks

  • City of London faces uncertain future on single market access (Photo: Ralph .)

EU competition authorities have sunk their teeth into UK tax perks for multinationals amid a wider crackdown on aggressive tax avoidance.

The European Commission said on Thursday (26 October) it had opened an "in-depth investigation" into a British law that let big corporations shift profits to offshore subsidiaries.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

  • Vestager's probe comes after claw-backs in Belgium, Ireland, Luxembourg, and Netherlands (Photo: European Commission)

It said the opening of the probe did "not prejudge the outcome of the investigation".

But it indicated that if the UK scheme constituted illegal state aid, then Britain could go the way of Ireland or Luxembourg in terms of EU injunctions.

"We will carefully look at an exemption to the UK's anti-tax avoidance rules for certain transactions by multinationals, to make sure it does not breach EU state aid rules," the EU competition commissioner, Margrethe Vestager, said.

The Commission's wider crackdown has seen US tech giant Apple ordered to pay back €13 billion in tax perks to Ireland and online retailer Amazon pay €250 million to Luxembourg.

It has also clawed back money in Belgium and the Netherlands in actions involving corporate giants Fiat, McDonalds, and Starbucks.

The size of the UK ruling could be significant, with the British tax office, HM Revenue & Customs saying multinationals avoided paying €5.8 billion in taxes last year by booking profits overseas.

Vestager's investigation comes amid a background of slow progress in Brexit talks.

But the Commission indicated that the two processes were unrelated. It said the UK tax reforms in question and its initial investigations dated back to 2012 - four years before the Brexit referendum.

It added: "As long as the UK is an EU member state, it has all the rights and obligations of membership."

"EU competition law, including EU state aid rules, continue to apply in full to the United Kingdom and in the United Kingdom until it is no longer a member," it said.

The British treasury quickly rebuffed Vestager's initiative on Thursday.

"We do not believe these rules are incompatible with EU law but will cooperate with the European Commission's investigation," a treasury spokesperson said.

"We are clear that all multinationals must pay tax ‎on any profits they make in the UK, and our rules prevent these profits from being artificially diverted overseas," they added.

British negotiators are hoping to start talks in December on a transitional deal for after the UK leaves the bloc in March 2019.

They are also hoping to start talks on future trade relations.

With the future of the City of London at stake, British chancellor Philip Hammond has previously hinted the UK could become an offshore tax haven if the UK's financial centre was locked out of the single market.

Italy defiant on budget on eve of EU deadline

Italy would be committing economic "suicide" if it fell in line with EU rules, its deputy leader has said, in a sign that Rome has little intention of bowing to pressure ahead of Tuesday's budget deadline.

News in Brief

  1. UK's May defends Brexit deal to MPs, after ministers resign
  2. Brexit MP calls for 'no confidence' vote on May
  3. Denmark blocks Tanzania aid over homophobic crackdown
  4. Second UK cabinet minister resigns over Brexit deal
  5. UK Brexit secretary quits morning after deal agreed
  6. Romanian MPs call for national 'Magnitsky Act'
  7. Tusk: Brexit summit on Sunday 25 November
  8. Full text of Brexit withdrawal agreement published

Stakeholder

An open China brings opportunities to Europe

Some 60 years ago, the first major World Fair after World War II was held in Brussels. Sixty years on, China International Import Expo (CIIE), the first world expo dedicated to expanding imports, will open in Shanghai, China.

Stakeholders' Highlights

  1. NORDIC COUNCIL OF MINISTERSTheresa May: “We will not be turning our backs on the Nordic region”
  2. International Partnership for Human RightsOpen letter to Emmanuel Macron ahead of Uzbek president's visit
  3. International Partnership for Human RightsRaising key human rights concerns during visit of Turkmenistan's foreign minister
  4. NORDIC COUNCIL OF MINISTERSState of the Nordic Region presented in Brussels
  5. NORDIC COUNCIL OF MINISTERSThe vital bioeconomy. New issue of “Sustainable Growth the Nordic Way” out now
  6. NORDIC COUNCIL OF MINISTERSThe Nordic gender effect goes international
  7. NORDIC COUNCIL OF MINISTERSPaula Lehtomaki from Finland elected as the Council's first female Secretary General
  8. NORDIC COUNCIL OF MINISTERSNordic design sets the stage at COP24, running a competition for sustainable chairs.
  9. Counter BalanceIn Kenya, a motorway funded by the European Investment Bank runs over roadside dwellers
  10. ACCACompany Law Package: Making the Best of Digital and Cross Border Mobility,
  11. International Partnership for Human RightsCivil Society Worried About Shortcomings in EU-Kyrgyzstan Human Rights Dialogue
  12. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs

Latest News

  1. No-confidence calls against May put Brexit deal in doubt
  2. Key points of the Brexit deal (if it ever comes into effect)
  3. Romania heaps scorn on 'revolting' EU criticism
  4. US steps in to clean up Cyprus
  5. 'Decisive progress' on Brexit as British cabinet backs deal
  6. Asylum for Macedonia's ex-PM puts Orban on spot
  7. How the 'EU's Bank' fails to raise the bar on accountability
  8. Knives out on all sides for draft Brexit deal

Join EUobserver

Support quality EU news

Join us