'Brexit' will have the consequence of the departure of a member state that is opposed to tax harmonisation at European level, the committee on economic and monetary affairs (ECON) of the European Parliament concluded in the working document on the impact of the withdrawal of the United Kingdom from the EU.
In the financial field, this document argues that the British financial entities will no longer have the same access to European market unless, firstly, London accepts the four freedoms and, secondly, it continues to meet European standards.
The document put together by the economic committee does not touch upon the issue of the fiscal future of the UK, with fears of a tax haven an hour away from Brussels having been voiced by the OECD itself. It has gone no further than to anticipate the impact Brexit will have on the negotiations underway on various different texts. And the conclusion is exactly the same in almost every case: the taxation dossiers on the table are more likely to succeed if the United Kingdom is no longer seated around the table of the Council of EU.
As regards the common consolidated corporate tax base (CCCTB) project, which London is expected to oppose (see EUROPE 11697), Brexit may "increase chances of reaching the required unanimity in Council – although the UK is not the only member state to have opposed the CCCTB (in the previous negotiation: Ed) and opposition from other member state is likely to remain", the authors of the document note.
On the double taxation dispute resolution mechanism proposed in October of last year by the European Commission (see EUROPE 11654), the ECON document states that although the United Kingdom is theoretically expected to support the proposal, it is unlikely that London would "agree to a binding mediation and decision-making body at EU level. Again, the UK's departure from the EU may therefore increase chances of the proposal reaching the required unanimity in Council", the report reads.
Access to the financial markets of the EU will be the clincher
As the ECON document stresses, access to the European market for banks from third countries depends on passports that are already part of the Community acquis. If there is no agreement by the time the UK actually leaves the EU, British companies' passports will cease to apply. This will affect 5,476 businesses registered in the United Kingdom and 8,008 companies of the EU or the European Economic Area (EEA) holding passports to do business in the UK.
In order to obtain a passport as a non-EU member state, the UK's only option would be an agreement similar to the EEA (the Norwegian model). "Such agreements include counterparts, such as accepting the four fundamental freedoms, the binding nature of the Court of Justice's rulings and a contribution to the EU budget", the document states, adding: "in the absence of concrete legal arrangements to the contrary, a single passport thus will no longer be available to UK-licensed firms, and third-country provisions will apply instead. This will have a significant impact on how the UK and EU financial institutions conduct their business".
After 'Brexit', a raft of rules on third countries, not linked to equivalence regimes, will apply for UK entities, including default prudential requirements to third-country exposures of EU banks.
Equivalence decisions (which are unilateral EU decisions) for certain sectors of the market could be a default option for the UK . "It could be argued that the UK, up to the moment of withdrawing, would have been compliant with all relevant EU law", the document reads, explaining that an equivalence decision could be adopted provided that London does not backpedal on any of the prudential rules. "Retaining equivalence over time" is possible as long as London maintains the EU's regulatory standards, the document states. However, it goes on to warn that "the EU can at any time change its regulatory framework, making the equivalence decision obsolete".
See: http://bit.ly/2lyvFYm (Original version in French by Elodie Lamer)