TaxCorporate TaxECJ decisions costing UK £8bn annually

ECJ decisions costing UK £8bn annually

Britain has 'lost control' over corporate tax provisions judged to conflict with the European Union's single market objective at a cost of £8bn a year, according to a report published by the Centre for Policy Studies.

Link: European court says no! no! no! on Bosal

Author Alistair Craig, an international tax adviser, said that although the UK has retained the right to fix tax rates and raise taxes, the Luxembourg-based European Court of Justice has been striking down provisions it judges to be discriminatory under single market legislation.

He estimated the value of cases currently going through the courts at £10bn and on-going revenue losses at an annual £8bn.

Craig said the British government had so far failed to admit to the scale of the problem, relying on prime minister Tony Blair’s declaration that taxation is a ‘red line’ issue for the UK, with the implied threat to veto the proposed EU Constitution if that should threaten tax sovereignty.

But he pointed to the expectation that next week chancellor Gordon Brown is expected to announce that all UK companies must adopt thin capitalisation and transfer pricing rules irrespective of whether they have overseas subsidiaries, at a huge compliance burden, because of an ECJ ruling.

He claimed the use of legislation to solve problems caused by ECJ rulings was leaving British corporate taxpayers facing uncertainty, increasing burdens on UK companies and undermining the EU’s own competitiveness.

Craig, a chartered tax adviser with ‘a major accounting firm in the City of London’, said potential provisions in the draft constitution on tax harmonisation and the co-ordination of economic policies and EU measures to combat tax fraud and evasion would make matters worse.

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