EC probes low taxes

EC probes low taxes

European Commission announces review of 'disguised state subsidies' across union. Chris Quick and Nigel Tutt report.

The European Commission launched a further attack on low tax regimesacross union. this week as it announced plans to review business taxes around Europe and assess whether they are ‘disguised state subsidies’.

In a policy statement on fiscal aid, the commission said it intended to assess or re-assess all special business tax schemes in member states.

These include lower rates, tax breaks, accelerated depreciation and debt cancellation. The move follows measures agreed by EU member states in December last year to end harmful tax competition between member states in attracting inward investment.

A commission spokesman said: ‘The policy statement aims mainly at clarifying the field of application of existing state aid rules and procedures.

‘It outlines that a tax advantage which is specific, in the sense that it benefits certain enterprises or certain productions, falls under the state aid discipline. Rules aimed at, for example, a certain region or a certain sector or a certain function within an enterprise, such as financial services, will be regarded as specific and therefore open to investigation by the commission.’

The commission has already limited the benefits of the Irish corporation tax schemes for manufacturing industry and the financial services sector in Dublin. Member state schemes for distribution or financial centre operations could also be attacked.

PricewaterhouseCoopers tax partner John Whiting said: ‘The move has potentially wide implications.

Phasing out special tax regimes would be of concern to multinational companies which see tax as a cost to be managed like any other.’

He added there were a large number of special tax deals available in member states.

He also expressed opposition to the commission’s long-term aim of harmonising tax rates across Europe.

‘There should be scope for different systems within Europe. It is hard to see why member states should not be allowed to have the tax systems they want,’ he said.

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