EU Commission's Plans Will Make Anglo/US Tax Treaty Illegal

by Ulrika Lomas, Tax-News.com, Brussels

23 June 2003

Bi-lateral tax treaties between the UK and the US could effectively become illegal if the European Commission follows through on its proposal to usurp negotiating powers from EU member states.

This could be the next step after the recent 'open skies' judgement which resulted in the European Commission winning its battle to control landing rights agreements between member states and the US.

At present, UK firms enjoy a 0% withholding tax in the United States as part of the Anglo/US taxation treaty, though this might be threatened under the Commission's plans. Estimates put the value of the UK/US treaty at £400 million in saved tax payments for the UK.

The Commission are due to make an announcement on the issue in 2004 though one of the implications of commission thinking could be a separate European Union model tax treaty replacing the current OECD (Organisation of Economic Cooperation and Development) set up.

"We are working on that," said a Commission spokeswoman to Accountancy Age, adding "but we don't plan to present it before next year. We would probably consider the results of the open skies judgement in that."

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