Financial Secretary to the Treasury, David Gauke, has told European ministers that the UK Government is opposed to EU plans to introduce common tax rules across the bloc and is insisting on tax competition.
A committee of MEPs has been set up to examine how multinationals are avoiding tax in the EU and what can be done about the situation. The committee members strongly support the reform plans announced by European Commissioner for Tax, Pierre Moscovici, who is seeking to resurrect a longstanding tax harmonisation policy, which has been blocked by ‘hostile’ member states since 2011.
Known as the common consolidated corporate tax base, or CCCTB, the policy would see EU countries adopt a common set of rules on where company profits arise, thereby removing many of the national differences that multinationals have been able to exploit to lower their tax bill.
The Commissioner has been sounding out EU members, prompting him to water down key elements of the CCCTB in an effort to make it more palatable. However, even these are being met with resistance by the UK and the Treasury has said it is not in favour of the plan.
In fact, Chancellor George Osborne is keen to retain the UK’s tax competitiveness and has cut the headline corporate tax rate from 28 per cent to 20 per cent and also introduced new, favourable tax regimes for multinationals with offshore financing subsidiaries, as well as new tax breaks for patent-owning companies.
This has resulted in a wave of companies relocating their European headquarters or research and development arms to the UK. In addition, there has been an influx of multinationals to the country looking to gain tax advantages through the move.