The European Union is drawing up plans to control Britain’s tax policies after Brexit, leaked documents seen by The Daily Telegraph disclose.
According to draft documents, the EU wants to ensure the UK pledges to keep its tax rules aligned with those of the bloc as part of any future Brexit agreement.
Such a move would prevent the UK from becoming a low-tax economy by cutting its corporation tax rate to attract business. And – depending on the wording of any agreement – it could mean that any future changes to the EU’s tax rules would need to be followed by the UK, even years after Brexit.
The document was written by the European Parliament’s TAX3 secretariat following a meeting with the Brexit Task Force, the EU negotiating team led by Michel Barnier, last week.
It states: “The objective is that the UK will abide by the tools adopted at EU level to fight tax evasion/avoidance.”
The EU desire for alignment on tax reflects a fear in Brussels that Britain could become a Singapore-style low-tax economy after Brexit and a magnet for business and investment.
Although it has no current power over the UK’s tax, the EU has made no secret of its desire to clamp down on low-tax member states, including Ireland, and has long called for a universal corporation tax rate.
Last month Jean-Claude Juncker, the European Commission president, called for national vetoes on tax to be scrapped, causing uproar among Irish politicians amid fears it would choke off investment.
Earlier this year Philip Hammond, the Chancellor, told a German newspaper that if Britain was denied access to European markets it would “change our economic model to regain competitiveness”.
John Longworth, co-chairman of Leave Means Leave said: “These leaked documents confirm what leavers have feared all along, that the EU will stop at nothing to stifle Britain’s competitiveness post Brexit.
“An agreement on tax provisions would of course also bind us to future regulations. If they are keeping this secret, what else are they planning for us? If Chequers wasn’t bad enough, it’s clear Brussels are expect us to cave in further. We are now facing a complete sell-out.”
Jacob Rees-Mogg, chairman of the European Research Group of Tory backbenchers, said: “The worrying thing about this is that the EU wants more power over our taxes once we leave than when we were a member of the EU.
“This is part of a punishment Brexit and only serves to reiterate why it’s so important we leave. We need to free ourselves from such an uncompetitive structure before it is too late.”
The leaked paperwork was drawn up following a meeting with the Brexit Task Force on Oct 11. Set up in February, TAX3 is the EU’s special committee on taxation, looking at financial crimes, tax evasion and tax avoidance.
The wording of the minutes of the meeting suggests Brussels will try to impose EU tax policies on the UK and its overseas territories after Brexit next March. Describing the Prime Minister’s Chequers proposal as “wishful thinking”, the documents state: “According to the Commission, it is not feasible that the political declaration will not include taxation provisions.”
The paperwork adds: “The mandate for the negotiating team is to define and create a level playing field, taking into consideration four main areas, of which one is taxation.
“The objective is that the UK will abide by the tools adopted at EU level to fight tax evasion/avoidance, namely Code of Conduct on Business Taxation, Exchange of Information Directives (DAC) including Country by Country Reporting between tax authorities, Anti-Tax Avoidance Directive (ATAD).”
These directives insist that other countries which trade with the EU report their tax status so the EU can close any perceived “loopholes”.
Referring to Britain’s overseas countries and territories (OCTs), the document adds: “The intention is that they commit to continue to alignment with EU standards, including for their OCTs.”
Brexiteers claim that if Mrs May signed up to the EU’s plan, the UK could lose all influence on important matters of tax compliance. Britain currently has a veto in the Council of Ministers on tax legislation.
19th October, 2018: Daily Telegraph