TaxCorporate TaxIn a class of its own

In a class of its own

In a perverse twist of fate last Tuesday, government officials were forced to share the same Luxembourg-bound plane as lawyers acting against them for high-street favourite Marks & Spencer.

Both were heading for the Grand Chamber of the European Court of Justice – along with over 200 onlookers – for the M&S group tax-relief case.

Tensions were high, and it was probably a good job they were separated, with one group sitting in economy while the other enjoyed a far more comfortable ride in business-class.

What was surprising, however, was that the lawyers took the cheap seats, while our beloved civil servants enjoyed the silver service and fine wines.

But that’s another story.

As soon as they entered the Grand Chamber, both parties were on a level-playing field before the 13 ECJ judges. Both sides had precious little time to deliver a defence to what could be one of the widest-reaching tax cases in history.

The national governments in attendance – there were eight including the UK – wore their hearts on their sleeves. ‘Do you have any idea how much this will cost us?’ seemed to be the theme.

And while there is no doubt that the £30m refund (£50m including interest) to which M&S feels entitled is just the tip of a very large iceberg, the potential costs to national governments are of little consequence to international law.

Freedom of establishment is a fundamental building block for a successful European Union. Discrimination against either a company or an individual due to their country of origin flies in the face of the Treaty of Rome.

And so, the national governments of Europe face a testing time. Perhaps if the UK loses the M&S case, the other countries will take it on the chin and see it as a good time to finally address the harmonisation of EC tax law. But somehow I doubt that.

More likely is that each country will come up with its own hair-brained plan to try and circumvent the impact of the ECJ’s decision.

And that will only give more work to the lawyers. Next time they will probably be the ones travelling business class.

David Rae edits the tax page.

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