ICAEW Questions Need For CFC Clause In Finance Bill

by Amanda Banks, Tax-News.com, London

21 June 2002

The Institute of Chartered Accountants in England and Wales (ICAEW) has hit out at provisions contained in Chancellor Gordon Brown's Budget which allow the Treasury Department to deny exemptions to controlled foreign companies (CFCs) in jurisdictions which the government considers are not doing enough to remove harmful tax practices, according to a report in the Jersey Evening Post on Wednesday.

The newspaper quotes the ICAEW as stating that Clause 88 of the 2002-03 Finance Bill represents 'an inappropriate response to a particular problem'.

The clause has been mentioned in connection with the European Union's savings tax directive, and there were fears that it could be used to force the Crown Dependencies to comply with the the EU's information exchange proposals. However, the fact that both Jersey and Guernsey have now both agreed to exchange information with the 15 nation bloc on non-resident savings interest has led the accounting body to question more than ever the need for such a provision.

'Whilst we understand that the UK government hopes it never has to invoke this section, that begs the question as to why it is considered necessary in the first place,' the Institute was quoted as observing this week.

According to the Jersey Evening Post, concerns were also expressed that such a powerful lawmaking tool should fall into the hands of the Treasury, rather than remaining the responsibility of Parliament as a whole.

Recommended