Economy. Brussels takes UK to TEU for not recovering $ 100m in illegal tax aid in Gibraltar

Brussels, 19 (Europe Press)

The European Commission on Friday denounced the United Kingdom in front of the European Union’s Court of Justice (TEU) for not fully recovering the € 100 million granted to multinational corporations in Gibraltar through a tax regime that violates European states’ rules on state aid.

Specifically, the executive director of the community explained that The Rock authorities have only recovered about 20 million euros of the illegal tax assistance that was identified in the context of the investigation (20% of the total) despite the passage of “more than two years” since then. They asked for it.

The case dates back to 2013, when the executive director of the community launched an investigation against the corporate tax system that Gibraltar initiated three years earlier. Brussels concluded in December 2018 that the five interest exemptions and royalties and tax agreements or “ tax provisions ” that Gibraltar had closed with various companies were illegal, so it ordered the aid given back.

“More than two years after the committee made its decision, the aid has not been fully recovered yet, and not enough progress has been made to restore competition. That is why we decided to refer the UK to the Court of Justice,” he said. Explained in a statement, Vice President of the Executive Community in Charge of Competition, Margaret Westager.

Brussels stressed that the Gibraltar authorities should have recovered before April 23, 2019 all the money provided by the multinational corporations from their payment to the public treasury through this system. The European Foundation has argued that the recovery “must happen as quickly as possible” because for that to happen “the beneficiaries continue to enjoy an unfair competitive advantage”.

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The department headed by the Danish Vestager had been “in regular contact” with the authorities of Peñón, who stated that four multinational companies had taken advantage of a tax system that had been declared illegal. At present, only two companies have returned the aid given and the amount is only 20% of the total.

“The recovery remains pending by Mead Johnson Nutrition (the beneficiary of a tax agreement) and partly by Fossil (the beneficiary of the illicit aid scheme,” the European Commission defines.

The agreement between the European Union and the United Kingdom to leave the European Union stipulates that the European Commission can take London before European justice for its failure to comply with decisions taken before the end of the transition period on December 31, 2020.

The Brussels investigation.

In October 2013 Brussels opened an investigation against the corporate tax system in Gibraltar introduced in 2010 due to “serious suspicions” that it could violate community regulations on public assistance by including exemptions in this tax for interest and dividend payments.

The community executive expanded the file in October 2014 to also include a total of 165 tax agreements or “ tax provisions, ” suspecting they were not based on sufficient information to ensure that recipient companies were taxed on the same terms as other companies created or the income derived From Gibraltar.

With regard to the first pillar of the investigation, Brussels decided that companies benefiting from interest or royalties are exempt from paying tax “without an acceptable justification”. Consequently, the measure “greatly favors” a group of companies belonging to multinational groups whose activities focus, for example, on granting intra-group loans.

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However, Gibraltar abolished the tax exemption on interest income in July 2013 and the exemption from royalty income in January 2014.

With regard to the investigation of tax agreements, the community executive has determined that 5 of the 165 “tax rulings” assessed constitute illegal government aid. All five specifically refer to Gibraltar’s tax treatment of specific income resulting from limited partnerships in the Netherlands. In contrast, the European Commission did not discover any selective advantage over the other 160 tax deals evaluated.

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