REINFORCED TAX POLICY CO-OPERATION
(20901)
13140/1/99
—
| Reinforced tax policy co-operation. Third Progress Report of the ECOFIN
Council to the European Council.
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| Legal base:
| — |
| |
| Department: |
HM Treasury |
| Basis of consideration:
| Letter of 17 May 2000 |
| Previous Committee Report:
| HC 23-viii (1999-2000), paragraph 17 (9 February 2000),
HC 23-xii (1999-2000), paragraph 6 (15 March 2000) and
HC 23-xvi (1999-2000), paragraph 6 (10 May 2000)
|
| Discussed in Council:
| ECOFIN and Helsinki European Council in December 1999
|
| Committee's assessment:
| Politically important |
| Committee's decision:
| Cleared (decision reported on 9 February) but asked to be
kept informed of progress in the work of the Code of Conduct Group
|
Background
9.1 In February 2000, we reported on the third
progress report on reinforced tax co-operation, submitted
by ECOFIN to the European Council in December 1999. We asked a
number of questions on which we reported further in March and
in May. In our last Report, we noted that the State Aid rules
did not apply to the UK dependent territories. But we asked whether
the Commission might be entitled to take action against the UK
under the State Aid rules if the combined effect of tax arrangements
in one of the UK's overseas territories and in the UK were thought
to give a UK company an unfair competitive advantage (for example,
the sourcing of dividends in a subsidiary established in a UK
dependent territory by a holding company established in the UK
on which tax was payable at the (reduced) rate applicable in the
territory).
The Minister's reply
9.2 In her letter of 17 May 2000, the Paymaster
General (Dawn Primarolo), says that:
"An essential feature
of State Aid is that the advantage is granted by the State or
through state resources. This fundamental feature of the State
Aid rules means that any enquiry by the Commission would have
to focus on the tax position of the UK company and not how a subsidiary
is taxed in an overseas territory.
"In the example you give, there would be no
UK tax measure granting any advantage to the UK company."
Conclusion
9.3 We thank the Minister for her answer and
have no further questions.
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