On Tuesday 26 January, the European Parliament Subcommittee on Tax Matters (FISC) and the European Commission reviewed the impact of Brexit on tax matters and the guarantees in the agreement on future relations between the European Union and the United Kingdom (see EUROPE 12628/6). The MEPs are concerned that a tax haven will be created on the EU’s doorstep.
Paulina Dejmek-Hack, who is a member of the working group on the future relationship with the United Kingdom, explained that, although the agreement clearly cannot cover the corporate tax rate the United Kingdom sets, it does contain a good governance clause, which includes the requirement to comply with the full OECD BEPS action plan.
The agreement also includes a non-regression clause on tax standards, which commits the UK, as a minimum, to maintain standards at the same level as the OECD standards at the end of the transition period. The United Kingdom has committed to maintaining the key elements of the EU rules on exchange of information between tax administrations and on tax avoidance.
According to the Commission, the joint political declaration on combating harmful tax regimes is another important tool. “The objective is to replicate the effect of the EU Code of Conduct on business taxation and prevent the UK from introducing harmful business tax regimes”, said Dejmek-Hack.
“I hear a lot of fears on the expected position of the United Kingdom on this question of taxation. Today, the United Kingdom supports very clearly the discussion in the OECD towards an agreement on an effective minimum taxation. It teams up with the European Union in order to have a robust agreement”, said Benjamin Angel, the Director for Direct Taxation in the Commission’s Directorate-General for Taxation (DG TAXUD).
However, some MEPs, including Aurore Lalucq (S&D, France), felt that more guarantees were needed and again called on the Commission to use the equivalence determination process for UK financial services to get a strong commitment from the UK against tax dumping (see EUROPE 12630/9).
“The fact that taxation and anti-money laundering are not part of the rebalancing mechanism and making future progress contingent on global progress is nothing else than a late victory of United Kingdom. Because this is what they always argued while they were still a member of the EU, so they wanted taxation only to be agreed in the framework of global agreements”, said Sven Giegold (Greens/EFA, Germany).
The Commission admitted that it would have liked to have gone further on this point. State Aid and subsidies are nevertheless covered by the rebalancing measures, said Dejmek-Hack.
In response to a question from Giegold about the free-trade zones announced by the British Prime Minister, Boris Johnson, the Commission representative felt that this would need to be monitored closely and its impact evaluated. She said that the joint political declaration on combating harmful tax regimes also applies to free ports. (Original version in French by Marion Fontana)