A British government scheme that helps multi-national firms pay less tax is set to be investigated by the European Union. The loophole in the form of a tax scheme exempts multi nationals from certain anti-tax avoidance measures. It was introduced under the David Cameron Government in 2013.
MNCs under the tax scheme could lower their tax bill by transferring a part of their taxable income to an offshore entity known as a ‘Controlled Foreign Company’. CFCs are operated by MNCs to transfer their capital around the world for their global businesses.
Margrethe Vestager, the European Commissioner in charge of competition policy, said: “All companies must pay their fair share of tax. Anti-tax avoidance rules play an important role to achieve this goal. Rules targeting tax avoidance cannot go against their purpose and treat some companies better than others. This is why we will carefully look at an exemption to the UK’s anti-tax avoidance rules for certain transactions by multinationals, to make sure it does not breach EU state-aid rules.”
Read more at http://www.independent.co.uk/news/uk/politics/tax-avoidance-brexit-eu-britain-evasion-state-aid-rules-a8021176.html
This post has been authored by Ravi Shankar of West Bengal National University of Juridical Sciences, Kolkata.
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