Brown could face £20 Billion Tax Bill!
August 24, 2004 by Ken
Filed under The Best of the Rest
The High Court has allowed another legal challenge to the Inland Revenue’s corporation tax rules.
Up to now more than 300 international companies have filed legal actions in London, claiming that the government has taxed them on their UK earnings in ways that break European law. The multinationals protest that, for much of the Nineties, their UK subsidiaries were forced to pay corporation tax to the Inland Revenue before they were able to transfer their UK profits to parent companies abroad.
The basis of these cases lies in a judgment made by the European Court of Justice in 2000, stating that “this rule broke EU agreements and discriminated against non-UK corporations”. In 1996, the ECJ ruled that tax relief for losses incurred by subsidiaries established in other EU member states could be set against profits from companies registered in the UK. This has not been allowed by UK law.
The ECJ relied on Article 43 of the Maastricht Treaty, guaranteeing “freedom of establishment” which it has taken as over-riding Article 93 giving member states sole rights over their tax systems on the basis of financial cohesion.
It is important to accept that once the EU has the legal right to decide on something they will then use that power to interpret the clauses in the treaties and the future Constitution in a the way they see as a benefit to the EU and its institutions, and will ignore other clauses which oppose their view.
Article 93 is quite clear that tax is the prerogative of member states, yet the EJC has in this case used another clause to render article 93 meaningless.
Even now Tax is one of Mr Blair’s red lines, yet we can clearly see that this red line is nonsense.
If the Constitution as a Constitution is to have any meaning then the power to overrule the agreements of our elected leaders must be removed from the EU Court, it can no longer be allowed to adjudicate on the these matters, which have been agreed by member states leaders, and then overturn their positions when passing the treaties, agreements, through their own parliaments.
Because if not, then no agreement can make any sense, if it its passed though parliament on the understanding that tax remains with the states, then that position should only be changed only with a further agreement, not by an arbitrary decision by the EJC.
Because the EJC does have this power, it totally undermines any arguments relative to red lines and retaining power in the member states parliaments.
So the next time Mr MacShane or Mr Blair tells us that they have retained the power over tax laws, we can all know that they are lying through their teeth. Because whether they have or not, will be decided next year by British judges, who will have to accept that the EJC rulings are superior to theirs, and EU law is superior to British law, so there can only be one outcome
