Brexit May Make U.K. More Attractive to Multinationals After EU's Apple Ruling
August 30 2016 - 4:19PM
Dow Jones News
By Jason Douglas
LONDON -- In theory, quitting the European Union would free the
U.K. from the sort of EU oversight that on Tuesday resulted in
Brussels ordering Ireland to recoup some EUR13 billion ($14.5
billion) of what it called unpaid taxes from one of its biggest
multinational investors, Apple Inc.
That and the country's low corporate tax rate could burnish
post-Brexit Britain's allure for multinational companies, provided
it maintains a high degree of access to the EU's huge single market
for goods and services, tax experts say.
The EU's antitrust regulator on Tuesday demanded Ireland recoup
the EUR13 billion, plus interest, from Apple after ruling that a
deal between Apple and Dublin allowed the technology giant to avoid
almost all corporate tax across the entire bloc for more than a
decade.
Apple said it would appeal the decision, as did the Irish
government.
The tax clawback attempt is the highest ever demanded under the
EU's longstanding state-aid rules, which forbid companies from
gaining advantages over competitors because of government help. The
ruling also represents the latest salvo in a global crackdown on
perceived tax avoidance by big, globe-trotting firms.
As an EU member, the U.K. is bound by EU tax laws as well as the
anti-state aid rules that led to the judgment against Apple until
it leaves the bloc -- a process that is still expected to take more
than two years. It is unclear whether ditching state aid rules
entirely will be possible for the U.K. if it wants to maintain
unfettered access to the single market. Non-EU members such as
Switzerland, for example, have had to agree to abide by the rules
as well.
Stephen Herring, head of taxation at the U.K.'s Institute of
Directors, a business lobby group, said leaving the bloc should
nevertheless give Britain some extra scope to ensure its tax regime
is competitive.
"I think the U.K. will have some more wriggle room," he
said.
The U.K. has been at the forefront of international efforts to
reduce tax avoidance while at the same time cutting corporate tax
rates at home. Bill Dodwell, head of tax policy at consultancy
Deloitte LLP, said the U.K.'s mix of low tax rates and its tough
line on avoidance is "a sensible strategy."
Former Treasury chief George Osborne, who resigned in July
following Britain's June 23 vote to exit from the EU, argued such
an approach would ultimately boost government revenue.
He legislated in March to lower the U.K.'s main rate of
corporate tax to 17% by 2020 from 20% currently. That would make
the U.K. corporate-tax rate the lowest in the Group of 20 advanced
and developing economies.
He also floated the idea of cutting corporate taxes even further
in the wake of the referendum result, to reassure multinationals
that the U.K. remains "open for business." His successor, Philip
Hammond, has said he would wait and see how the public finances are
coping with Brexit before pledging the same.
A Treasury spokeswoman said Tuesday that Mr. Hammond will set
out his tax and spending plans toward the end of the year in a
regular financial statement to Parliament. A spokesman for the
prime minister's office said the U.K. would welcome any company
that wished to relocate here. But he said the Apple ruling was a
matter for the company, the Irish government and the European
Commission, the EU's executive arm.
Write to Jason Douglas at jason.douglas@wsj.com
(END) Dow Jones Newswires
August 30, 2016 16:04 ET (20:04 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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