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EU hits Britain over illegal tax break to multinationals

The decision against Britain involves something called controlled foreign company rules that help prevent firms from using an offshore subsidiary to avoid British tax./AFP

BrusselsBelgium, Apr 2 – The EU’s powerful anti-trust authority on Tuesday said a tax break from Britain for unnamed multinationals was illegal under state aid rules, firing a shot at London amid Brexit chaos.

The European Commission gave no indication of the amount of money to be recovered nor the companies involved, but said the tax break “unduly exempted certain multinational groups” from UK anti-tax avoidance rules.

“This is illegal under EU State aid rules. The UK must now recover the undue tax benefits,” European Competition Commissioner Margrethe Vestager said in a statement.

The decision was a partial one, the EU said, with other aspects of the investigation finding no fault in Britain’s tax decisions.

But it lands just days after March 29 — Britain’s originally-slated date to leave the EU — and serves a reminder that the UK will be expected to meet its EU membership obligations before and after Brexit.

Britain joins Luxembourg, Netherlands and Ireland as EU countries needing to recoup money from multinationals illegally handed tax breaks.

The crackdown on London is part of a five-year campaign against member states bending rules to give big international firms unfair tax breaks, with US tech giants such as Apple, Amazon and Starbucks already ordered to pay back taxes.

The EU pressed on with the campaign in January and launched an in-depth probe into Nike’s tax affairs in the Netherlands.

The decision against Britain involves something called controlled foreign company rules that help prevent firms from using an offshore subsidiary to avoid British tax.

The commission said an exemption to these rules in some cases unfairly awarded companies the tax break.

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