back to article Boffins befuddled over EU probe into UK's tax rules for multinationals

Experts are mystified as to why the European Commission has launched a probe into the UK tax arrangements of multinationals. Last week the commission opened an investigation into a UK government scheme it claims exempts large companies from anti-tax avoidance measures, believing the dispensation may break EU competition rules …

  1. anothercynic Silver badge

    It is possible...

    ... This refers to the tax 'loophole' (or similar exemptions) that exempts foreign-controlled companies from paying CGT on (amongst others) their real-estate holdings in the United Kingdom. British companies are charged CGT, a limited in, say... Bermuda is not. And if Bermuda does not charge CGT on gains by a company domiciled in its jurisdiction, the gain is effectively not taxed at all.

    Apparently one MP tabled a motion on this, and was told that it would be too difficult to implement (really?).

    1. cnb

      Re: It is possible...

      Stop believing everything you read in The Guardian. No company, wherever it's registered, pays UK CGT on profits from the sale of any asset.

      1. Anonymous Coward
        Anonymous Coward

        Re: Stop believing everything you read in The Guardian

        .. and so I should believe everything I read about tax law in the comments section of El Reg instead..?

        :-)

        1. Pen-y-gors

          Re: Stop believing everything you read in The Guardian

          .. and so I should believe everything I read about tax law in the comments section of El Reg instead..?

          I get all my tax advice from El Reg commentards

          [signed: prisoner 21543, HMP Ford]

  2. Voland's right hand Silver badge

    It will matter

    It won't matter by March 2019

    Of course it will. It is setting up pieces into position to be able to raise punitive tariffs after March 2019 on any multinational STILL having their HQ in the UK and/or operating out of the UK.

    Hopefully (from the Eu perspective), it will be unnecessary - if there is an agreement in place and UK plays ball by the general Eu rules. If, however, UK does not play ball, anything and everything is a fair game to ensure that it cannot compete with the Eu. If, for example, UK provides "unfair" state aid to corporations HQ-ed in UK, Eu and WTO rules allow the Eu to apply appropriate measures to compensate - such as tariffs. It just needs to have the appropriate paperwork in place to do so.

    This is simply setting the scene so they can do it. It will not be the only case too. I would expect a whole raft of cases on various UK policies which were candidly overlooked while it was being a member to start their way through the workings of Eu bureaucracy until the end of the year (*).

    While our esteemed BrExit leaders would like to paint this approach as punitive and vindictive, it is not. It is simply Eu putting THEIR interests first. As expected.

    (*)IMHO, it is also the clearest indication that the Eu has little hope of an agreement being reached.

    1. Pen-y-gors

      Re: It will matter

      What's March 2019 got to do with it? The UK will still be in the EU in April 2019 (and April 2099). The EU officials are simply planning ahead.

      Face it, withdrawing A50 s the only option left, problem is the Maybot is still trying to find an alternative to accepting reality.

      1. Dan 55 Silver badge

        Re: It will matter

        At the very least, unless everything comes off the rails, there'll be a two (or one and a half) year transition period where the UK will still be subject to EU law.

    2. Paul Shirley

      Re: It will matter

      Threatening to become an offshore tax haven may not have been the best negotiating tactic.

      1. Rich 11

        Re: It will matter

        But on the plus side, it does expose to public view those Tory MPs who think that having the UK become a tax haven would be an absolute wonder, the best thing in the world.

        If you've got money.

        As usual, the rest of us would end up paying the price for their ideology. Or do you believe in trickle-down economics? If you jump up and down three times, spin widdershins and cross your fingers, will trickle-down come true? Yes! Of course it will! You'll know the truth of trickle-down when you feel that warm, yellow, salty fluid trickling down your back...

    3. Mark 65

      Re: It will matter

      If, for example, UK provides "unfair" state aid to corporations HQ-ed in UK, Eu and WTO rules allow the Eu to apply appropriate measures to compensate - such as tariffs.

      Because the EU doesn't provide state aid does it? Christ, half the companies in the EU couldn't exist without suckling firmly from the taxpayer teat.

  3. JimmyPage Silver badge
    Holmes

    My first thought was ...

    here's a way to add a few zeros to any sum the UK might think it can get away with paying.

    1. Warm Braw

      Re: My first thought was ...

      The precedent is the Apple case and the EU is simply demanding Ireland collect the tax from Apple, not that it hand it to the EU...

      1. imanidiot Silver badge

        Re: My first thought was ...

        Apple paying Ireland means higher income for the Irish government. More income leads to having to pay more to the EU.

        So yes, a portion of that money goes straight to brussels.

  4. Doctor Syntax Silver badge

    It's a ploy to draw attention to the fact that they've created a system whereby there's a competitive market in tax rates for multinationals. They'll never get the consensus needed to change that because it gives smaller economies a double advantage: it draws in the multinationals' tax payments and, as a side effect, local businesses get the benefit of the lower corporation taxes as well.

    They're now trying to mitigate that with state aid rules.

  5. Rich 11

    "Boffins befuddled..."

    Since when has the term 'boffins' included tax lawyers? Barnes Wallis must be spinning in his grave.

    1. BoldMan

      Re: "Boffins befuddled..."

      I wish I could up-vote you more than once!

      1. Andrew Barr

        Re: "Boffins befuddled..."

        I will add my vote for you :D

    2. Excellentsword

      Re: "Boffins befuddled..."

      A person with knowledge or a skill considered to be complex or arcane.

      Sounds like tax law to me.

      1. I ain't Spartacus Gold badge

        Re: "Boffins befuddled..."

        NO! NO! NO! The knowledge has to be arcane, I'll grant you. But there also has to be a certain suggestion of sheds, leather elbow patches and pipe smoke.

        Also I think in general that boffinry also has connotations of making do with a certain lack of funds, and building clever stuff out of ordinary household objects. So accountants are also too well paid.

        If you can't build a radio telescope out of army surplus radar gear and bed frames, then operate it from a shed while drinking tea out of a thermos and smoking your pipe, then you ain't a boffin!

        1. Rich 11

          Re: "Boffins befuddled..."

          Drinking tea out of a thermos?! You're not a real boffin if you need a thermos to keep your tea hot. You build your own heat pump out of an old fridge, a desk fan and a clockwork-controlled gravitational potential energy drive system.

          1. Stevie

            Re: You're not a real boffin if you need a thermos to keep your tea hot.

            You don't need a Thermos to keep your tea hot.

            You need it to keep your tea hot until the liquid nitrogen is ready, then you need it to keep the liquid nitrogen in for fast and ready application to the superconductor elements of ... but I've said too much.

        2. Doctor Syntax Silver badge

          Re: "Boffins befuddled..."

          "If you can't build a radio telescope out of army surplus radar gear and bed frames"

          As an added refinement, you do so when nobody else has even thought of doing such a thing.

          1. Sir Runcible Spoon

            Re: "Boffins befuddled..."

            As an added refinement, you do so when nobody else has even thought of doing such a thing.

            In addition to which it needs to fulfill a very silly requirement, such as spotting where you left your thermos the last time you went to the moon in your personal space pod made from old Lada parts.

      2. Anonymous Coward
        Anonymous Coward

        Re: "Boffins befuddled..."

        I would say that Boffins are experts in physics i.e. the physical world where the rules to learn are absolute withing their domain or they are thrown away, where as legal experts deal with the make believe i.e. no physical application whatsoever and subject to human whim.

        This is why tax has as many loopholes and inconsistencies as theology and relies upon human faith for it's existence i.e. a brick is always a brick no matter how many people believe it is a unicorn.

        Also they already have titles for masters of BS

    3. Pen-y-gors

      Re: "Boffins befuddled..."

      No, that's fair. UK tax law is considerably more complicated than piffling General Relativity or string theory, and only a serious mathematical-type boffin backed up by a couple of Crays would have any chance of deciphering it properly. Even 'top' tax accountants don't actually understand it all - they just give a random opinion and challenge anyone else to disprove it.

  6. Anonymous Coward
    Anonymous Coward

    EU competition rules

    Texts cost 10 euros and you can only enter once per household.

    Here's the multiple choice question.

    Are you in favour of brexit?

    A. Yes I don't like Johnny Foreigners and I'm old/young and live on a council estate.

    B. No I like Johnny Foreigners and I'm middle class even though that has no meaning anymore.

    C. Wait a second, this has nothing to do with foreigners and all governments including the EU are all as bent as each other so taking one out of the equation saves us money that can be better spent by our own corrupt government.

    Chew on that one remoaners.

    1. Anonymous Coward
      Anonymous Coward

      Re: EU competition rules

      Yawn, grow up and and go back to the Daily Mail comments section moron.

      1. Anonymous Coward
        Anonymous Coward

        Re: EU competition rules

        I'm sorry you don't understand sarcasm and you really don't understand government in all it's guises.

        Bless you child, may your days be filled with empty promises and pork.

      2. Anonymous Coward
        Anonymous Coward

        Re: EU competition rules

        I'm actually going to reply twice because I am incensed.

        F*ck off troll, I'm not advocating either stance however the recent actions of the EU make them look like nasty shits.

        1. Stevie

          Re: EU competition rules

          The best part about this thread was everyone posting as "anonymous coward" to argue with each other. The whole thing reads like a Gollum monologue from Lord of the Rings.

          1. CrazyOldCatMan Silver badge

            Re: EU competition rules

            The whole thing reads like a Gollum monologue from Lord of the Rings.

            But considerably less interesting. And with no decent CGI..

            1. Rich 11

              Re: EU competition rules

              Genius! I am now going to hear every pro/anti Brexit argument spoken in Gollum's voice.

              Admittedly I do have a head start in having listened to Michael Gove wittering on for years...

              1. Mark 65

                Re: EU competition rules

                What constitutes the "precious"? Tax revenue? Or just power over everyone?

        2. Anonymous Coward
          Anonymous Coward

          Re: EU competition rules

          recent actions of the EU make them look like nasty shits.

          The recent actions? They've always been nasty, incompetent shits. They're politicians, FFS!

    2. Rich 11

      Re: EU competition rules

      The flaw in this argument is 'better spent'.

    3. Chronos
      Paris Hilton

      Re: EU competition rules

      C. Wait a second, this has nothing to do with foreigners and all governments including the EU are all as bent as each other so taking one out of the equation saves us money that can be better spent by our own corrupt government.

      Yes, but having them fighting each other had them leaving us in relative peace. You think corruption was bad between 1979 and now? You ain't seen nothin' yet. The relevant noises are already audible in the background. Once they can remove the ECHR from the equation and get total control, you'll see exactly what the agenda was. If you're a large enterprise (not the 1701 kind) you're fine, if you're an individual with few assets and any expectation of privacy, freedom or rights, you're fucked.

      The only slight saving grace is that they haven't scrapped/remodelled/fucked up the House of Lords yet. It gets a little strange when the upper house is the only one possessed of any common sense, although I fully expect that to change once that vipers' nest in the other house and their unelected parasites get free of any scrutiny.

      The whole referendum was toxic. If it had gone the other way, the EU would be negotiating the removal of the UK's exemptions from the single currency and Shengen, demanding more and more of the pie and generally making as much of a nuisance of itself as it is now. I saw it coming and have nothing at all to do with the fallout because I made a conscious choice not to legitimise this farce.

      Paris. Well, it was fair warning for the shafting we're all going to get.

  7. Anonymous Coward
    Anonymous Coward

    It might still be relevant after Brexit, just not necessarily for the Brits

    If you've a company based in one EU jurisdiction (1), owning another company, effectively a subsidiary, based in another (2), then you can assign profits and losses to a certain extent between these entities based on ownership structures, inter-company loans, IP rights etc. There are some hurdles to be overcome and you don't necessarily avoid paying all taxes, but there can be significant reductions if, for example country 1 is somewhere like Malta or Cyprus with some very low rates of taxation and country 2 is somewhere in Northern Europe where these rates generally are a) higher and b) more likely to be collected.

    Now if country 2 happens to be the UK, then after Brexit the EU might not be able to claw back any money directly (or by instructing HMRC in some way) from the Brits involved, but they retain a certain power over those in country 1, so this could remain a valid enquiry from that point of view.

    1. maffski

      Re: It might still be relevant after Brexit, just not necessarily for the Brits

      It's related to a push on country-by-country reporting - taxation based on the customers location rather than the sellers. This would apply to all sales in the EU regardless of the selling companies location (don't worry about the small business practicalities, the EU is already of the opinion that a guy in Wisconsin selling his online fishing guide to visitors from the EU should charge and submit accurate VAT reports to all 28 member states).

      Ironically the complaints about 'tax avoidance' usually come down to transfer pricing and country-by-country reporting needs transfer pricing applying to every single thing a business does.

      1. Doctor Syntax Silver badge

        Re: It might still be relevant after Brexit, just not necessarily for the Brits

        "the EU is already of the opinion that a guy in Wisconsin selling his online fishing guide to visitors from the EU should charge and submit accurate VAT reports to all 28 member states"

        That's reasonable. It ensures the IRS will get complete tax reports on him as the US govt. is entitled to copies any data it wants held in all EU states.

        1. Chronos

          Re: It might still be relevant after Brexit, just not necessarily for the Brits

          That's reasonable. It ensures the IRS will get complete tax reports on him as the US govt. is entitled to copies any data it wants held in all EU states.

          Don't kid yourself. It already has the data. The idea of the CLOUD act is to make it admissible in court.

  8. codejunky Silver badge

    ha

    So in 2013 our rules were rewritten to please the EU because they were too restrictive for the EU, now the EU is kicking off about our implementation of their rules? There is nothing confusing about the immature having a tantrum. They have made their demands, and we reject them all. They refuse to negotiate on those demands and wont negotiate anything until those demands are met. And we still reject them all.

    I expect they may throw even more of a tantrum with the news that HSBC isnt expecting to have to send 1000 jobs to the EU as they already have the passporting problem solved. Or that we are still highly attractive for investment.

    The only hope I can have is that the EU realise it is better to not cut off their nose to spite their face. But I cant imagine their antics are doing them any favours when dealing with the rest of the world anyway.

    1. James 51
      Childcatcher

      Re: ha

      The antics of the various brexiteers, Nigel Farage, David Davis and BoJo in particular do us no favours in dealing with the rest of the world as well.

      1. codejunky Silver badge

        Re: ha

        @ James 51

        I would take Nigel Farage out of that list personally. When the UK politicians attacked Trump during the election process to have to beg for forgiveness was very unprofessional. While Farage did back Trump I do believe he was professional enough to be able to work with either as president (even though he wasnt even in power here!). He is probably the reason we have a trade deal opportunity and the EU doesnt.

        Although I would prefer Farage to be handling the negotiations with the EU. This would be a slam dunk pretty quickly even though the EU would almost certainly still not agree to negotiate.

        1. Rich 11

          Re: ha

          a trade deal opportunity

          You appear to be unfamiliar with one of the main policy planks upon which Trump got elected.

          1. tiggity Silver badge

            Re: ha

            That would be the sort of (not very favourable) opportunity a fresh faced youthI would face bending over for the soap in a very rough prison

        2. Anonymous Coward
          Anonymous Coward

          Re: ha

          >I would prefer Farage to be handling the negotiations

          Farage is a slimy little weasel who would only negotiate things that were of direct interest to him. The very last person that you would want negotiating on behalf of a whole country. Especially as his major ability seems to be the ability to make vast swathes of people dislike him.

          1. codejunky Silver badge

            Re: ha

            @AC

            "Farage is a slimy little weasel who would only negotiate things that were of direct interest to him."

            Didnt do bad at getting the referendum. Also seemed to do well befriending Trump while everyone else attacked the now elected president of the US. Who has stood up to the nonsense that the EU sweep under the carpet. And I doubt he would put up with half the idiocy from the EU negotiators not being allowed to negotiate until their dictated terms are met. But yes that does make the EU crowd hate him.

    2. 's water music
      Trollface

      Re: ha

      Well obviously we should get the UK's dad to kick the EU's Dad's arse. That will:

      1 Solve the tax probe issue

      2 Solve all the other Brexit negotiations issues

      3 Reestablish our place in the world as Not A Joke

      We should also consider re-branding as the Democratic Peoples Best Kingdom

      1. codejunky Silver badge

        Re: ha

        @ 's water music

        "Well obviously we should get the UK's dad to kick the EU's Dad's arse."

        Unfortunately some people do seem to see it in these terms. The EU is bigger and so we must bent to its will or something. What they dont seem to realise is that unless the EU is going to militarily invade they cannot dictate how we will leave, and likewise unless we militarily conquer the EU we cant force them to actually negotiate.

        This is simply a negotiation between the UK and EU and the EU doesnt want to negotiate. With no negotiation we still leave, we just have no obligations to the EU and anything we do is for ourselves.

        "We should also consider re-branding as the Democratic Peoples Best Kingdom"

        Why? I assume this is some sort of shot at the country but with a democratic vote to leave (actually 2 votes. One for a party to give us the vote and then the referendum itself). I am concerned with the reaction the EU seems to be having to our democratic vote however. They do seem to be interfering in member country elections to make sure the 'right' leader wins.

  9. Cynical Observer
    Facepalm

    Oh the irony - the sweet irony

    There has been no shortage of opinion in the El Reg fora when the EU focused its baleful gaze on the operations of Irish tax law. And that gaze is always provoked in the first instance by a whiff of inequality in the application of tax law. That inequality is adjudged to amount to state aid. So... in Ireland, foreign owned companies used to benefit from a lower level of corporation tax than the indigenous companies. The EU said fix it and lo, they did. The Apple deal was adjudged to be state aid and the EU said collect the taxes, and lo, they must (though they would rather not!)

    Similarly, the EU said that the deal that Amazon had with Luxembourg amounted to state aid and that it must be set aside so that the playing field is level.

    And now the EU says that a tweak spun into existence by George Osborne is unfair - because domestic UK companies cannot avail themselves of the same benefit that foreign owned companies can.

    But hey - this is the big bad EU picking unfairly on the UK...

    Because that's a better tagline than pointing out that the UK Gov screwed up.

  10. Anonymous Coward
    Anonymous Coward

    This is just part of the dysfunction that Brexit negotiations have become

    Both sides are to blame. This is just the EU staking its claim to XX amount more money from Britain as a part of whatever agreement is put in place when Britain departs.

    1. Red Bren

      Re: This is just part of the dysfunction that Brexit negotiations have become

      RTFA it's nothing of the sort.

      The EU is telling the UK to make to level the playing field between native and global corporations instead of offering sweetheart deals to the multinationals. The tax that gets collected still goes to HMRC, not the EU. The EU is looking after the interests of UK business and consumers better than their own government, who are more interested in ensuring cushy directorships when their political careers go south.

  11. John Smith 19 Gold badge
    Unhappy

    "George Bull, senior tax partner at consultancy RSM, "

    Perhaps because he wrote the relevant UK law?

    Given that rather a lot of it has been written by various senior staff of the "Big 5" Accountancy firms "seconded" to HMRC.

    Just imagine if they could get get the alleged £2Bn Bernie Eccleston still owes.

  12. ratfox
    Trollface

    Maybe they're just listening to Margaret Hodge saying that Google should pay more tax. "Look, your own politicians admit that global corporations are not paying their fair share! Now make them pay."

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