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ECJ Tax Judgements Could Cost UK £8bn In Tax Revenues

by Jason Gorringe,, London

08 December 2003

The UK government could lose up to £8 billion in tax revenues in coming years as a result of judgments on tax cases in the European Court of Justice according to a report by the Centre for Policy Studies.

Whilst Britain continues to proudly defend the ‘red line’ it has drawn on European tax harmonization, Alistair Craig, an international tax advisor and author of the report, says the government’s efforts may ultimately be in vain due to recent ECJ judgments that have eroded the UK’s right to retain and initiate tax law. He also argues that the government has hitherto been blind to the problem.

“The British Government has so far failed to admit to the scale of the problem it faces. It has attempted to respond to adverse ECJ rulings through the use of ad hoc legislation,” said Mr Craig.

Corporation tax raises some £30 billion annually for the Treasury writes Craig, whilst the cost of cases currently going through the courts is in the region of £10 billion. If all the other potentially affected provisions of tax law are struck down, this could result in a loss to the UK government of £8 billion he argues.

“And things will only get worse” warns Craig. “The draft EU Constitution contains proposals which will give the European Commission direct legislative influence for the first time over direct taxes both through the compulsory ‘co-ordination’ of economic and employment policies and through measures on company taxation relating to administrative cooperation or combating tax fraud and tax evasion (which will now be subject to QMV).”

“And in addition, the European Commission has a publicly-declared agenda to achieve the ‘harmonisation’ of corporate tax systems across the EU in the medium term,” he adds.

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