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EU ready to scrutinise UK Google tax deal in avoidance crackdown

European Union authorities in Brussels have reiterated their readiness to investigate the British government’s tax deal with Google, following the launch of a wider crackdown on so-called sweetheart arrangements.

Pierre Moscovici, Europe’s most senior tax policy official, said: “The commission will investigate the UK deal with Google if the need arises. However, the commission is clear that all companies must pay their fair share of taxes where they earn their profits.”

Moscovici, a former French finance minister, was speaking at the launch of a wide-ranging plan aimed at tackling corporate tax avoidance and sweetheart deals cooked up between companies and “avoidance-friendly” EU governments.

The plan aims to close down the main tax loopholes that have helped multinational companies avoid billions in corporation tax.

Hours earlier, his colleague in charge of EU competition policy, Margrethe Vestager, said EU authorities could investigate the British government’s deal with Google.

Catherine Bearder, a Liberal Democrat MEP, said she had tabled an urgent written question to the commission calling for an EU investigation into the Google arrangement.

“More transparency is needed across Europe to end these cosy deals and ensure multinationals pay their fair share,” Bearder said. “Only by working together inEurope can we stamp out tax avoidance and get a better deal for British taxpayers.”

EU scrutiny of the Google deal will add to the pressure on David Cameron, who has been accused of allowing the internet company to hold too much sway over his government, with critics ranging from the former business secretary Vince Cable to the media tycoon Rupert Murdoch.

The intervention by two of the most powerful economic policymakers in Europe is part of the EU’s two-fold attack on aggressive tax avoidance by multinationals.

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Vestager is examining whether the Irish government’s tax treatment of Apple amounts to illegal subsidies, and has also launched inquiries into Gazprom and Amazon. Moscovici has embarked on an overhaul of EU tax law as part of an effort to stop companies hiding profits in tax havens.

Moscovici said the EU was restricting member states’ ability to offer sweetheart deals, citing Vestager’s state aid work and his transparency measures.

“The days are numbered for companies that avoid paying tax at the expense of others,” he said, citing research that aggressive tax avoidance costs the EU between €50bn-€70bn (£38bn-£53bn) a year. This is the equivalent of Bulgaria’s GDP and five times more than the EU spent on the refugee crisis in 2015, he said.

Without naming names, the EU commissioner said some member states had “more avoidance friendly regimes [where] it is too easy for companies to lower their tax bills”.

The commission is seeking to close the most commonly used tax loopholes, such as the practice of setting up a subsidiary in a non-European tax haven, which is used to pay dividends back to the European parent company that are not subject to tax.

Companies will no longer be able to shift profitable intellectual property that has been mostly developed in Europe to a low-tax jurisdiction to avoid paying tax. There will be a catch-all anti-abuse rule empowering governments to close down new loopholes devised by creative accountants.

Moscovici said he was seeking to revive plans for corporations to file a single European tax form, regarded by officials as a vital step in preventing companies from funnelling profits to EU member states with more lax, less transparent tax systems.

The idea – known in tax jargon as common consolidated corporate tax base – would mean that companies face a single set of rules across the EU, although member states would still be free to set their own corporate tax rates.

The UK has long opposed CCCTB, as successive Labour and Conservative governments have jealously guarded national powers on tax. Ireland, another long-standing opponent, has traditionally seen the measures as a strike against its 12.5% corporate tax rate, one of the lowest in the EU.

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Moscovici said he was ready to pursue the idea, as the commission’s latest approach “could reduce the reluctance of some member states”. All tax plans have to be agreed by all 28 EU member states, prompting fears that they could be watered down.

Moscovici expects countries will sign up to his anti-avoidance plan by the summer, far faster than the usual EU legislative process. He said he was optimistic because EU governments had already signed up to a non-binding version of the plan through the OECD. He thinks public pressure will help: “Member states today are conscious of the demand from public opinion.”

Not everyone shares this view. Markus Ferber, a German centre-right MEP, who has campaigned against tax avoidance, said he was concerned that EU countries would dilute the tax-avoidance plan, citing an agreement on a tax transparency directive last December that he sees as limited.

“They adopted something to say they did something, but in reality it does not change anything at all,” he said. “That is my experience, so I am pessimistic [about the latest proposals].”


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