EU Ministers Set To Discuss M&S Tax Case

by Ulrika Lomas, Tax-News.com, Brussels

16 February 2005

European Commissioner for Taxation, Laszlo Kovacs has revealed that the landmark tax case involving UK retailer Marks & Spencer, which is being heard at the European Court of Justice, may be discussed at the upcoming meeting of the government ministers who make up the Tax Policy Group.

"I do have it in mind, although it's not yet on the agenda officially, to have an absolutely free and informal exchange of views on this issue on March 3," Kovacs stated following discussions with German Finance Minister Hans Eichel, according to Reuters.

In the case in question, Marks & Spencer is arguing that UK provisions on group tax relief are in breach of European law as they prevent an EU-based parent company from offsetting losses incurred by subsidiary companies in other member states, thus violating the principle of freedom of establishment.

A ruling in favour of M&S could have serious implications for national governments in terms of lost revenues, and German officials have reportedly warned that a victory by the company will cost the country EUR50 billion in lost revenues if applied retroactively.

However, Kovacs has rejected the notion of interference in the formation of ECJ case law by the EU’s executive body.

"The executive is not to make any judgment on the way the European Court of Justice is working," he stated.

Eichel, however, has taken a slightly more interventionist view on the issue, and told German newspaper Handelsblatt in an interview published on Monday that the Commission should urge the ECJ to allow governments time to discuss ways to adjust to unfavourable tax rulings.

"Such a deadline of perhaps two years at European level would make the consequences for national budgets manageable and increase pressure to come to a European solution within this time," Eichel told the paper.

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