European finance chiefs last week headed off the prospect of a fight between member states over tax revenues from multinational companies.
Ministers agreed a five-year extension to the ‘Arbitration Convention’, which provides a mechanism for resolving tax disputes between EU member states. The convention was due to run out in 1999, but will now continue until 2004.
Gordon Brown, speaking in Brussels, said the agreement would give the single market a boost. ‘Multinational businesses operating within the single market need to know their profits will not be exposed to double taxation. Business should not suffer because of disagreements between tax administrations,’ he said.
The Confederation of British Industry welcomed the deal. Adair Turner, CBI director general, said: ‘Businesses operating throughout the EU will be relieved that the future of the arbitration process has been secured.’
But the deal has been forged against a backdrop of seething discontent at the UK’s decision to tighten up rules governing transfer pricing arrangements within multinational business.
Last week the 100 Group of FDs said it was concerned the rules were not clear and companies could be fined for making genuine mistakes.
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