The potential costs of challenges to UK tax rules under European law, through several 'group litigation orders', were so serious that Whitehall feared disclosing them would threaten Britain’s position in the European Union.

The revelation emerges from papers just released by the information commissioner in rejecting a Freedom of Information request to disclose the GLOs’ estimated costs.

Releasing figures, the government argued, could 'lead to a press campaign against the UK involvement in Europe and the reach of the European Courts'.

Disclosure would also ‘call into question the government’s adherence to its own fiscal rules, which could increase the cost of borrowing’.

Speculation that taxes would have to be raised would have deterred inward investment, while disclosure might have undermine confidence in the government to manage the economy, causing ‘political instability’.

This apocalyptic vision appears to support speculation that, had the ECJ taken the uncompromising stand against ‘discriminatory’ tax rules that many pundits predicted, costs could have hit £20bn.

In one case, the franked investment income GLO, HM Revenue & Customs had revealed in court an estimated potential hit of £5bn.

The information commissioner was eventually swayed by the prospect that releasing highly uncertain and ‘worst case’ estimates could distort investor decisions towards companies with claims under the GLOs.

A lawyer familiar with the claims, however, said the fears of massive tax losses to the Treasury through the ECJ had been massively overblown.

‘I know a number of these cases and there was nothing to explain where the massive numbers were coming from,’ the lawyer said.

Peter Cussons, international tax partner at PricewaterhouseCoopers, said the government had limited losses by defending its ground doggedly, and had also been aided by a shift in the stance of the ECJ away from favouring taxpayers.

‘The predictions of Armageddon have not wholly materialised, but there have been major ructions

with the proposed changes to the taxation of foreign company profits so I think we are sitting at deuce,’ Cussons said.