The UK's past practice of offering sweetheart tax deals to multinationals may have amounted to illegal state aid. 

The European Commission is currently investigating Apple and a series of other multi-nationals who may have received special tax breaks created by countries including Ireland, Luxembourg and Holland.

According to Brussels, Apple has been receiving tax benefits year on year for the past 20 years which have allowed it to pay less than 2% corporation tax and amass over $100 billion in Ireland. These breaks amount to illegal state aid according to the EC and the company and country may expect substantial fines.

The EC is also probing deals between other countries and companies such as Fiat and Starbucks may expect similar fines.

In the UK the Chancellor, George Osborn now has his eye on taxing high tech companies such as Google, Microsoft. Paypal and Twitter whose accounting practices allow the companies to book UK sales as if they are made in a different (low tax) territory. On Monday, he announced that he is considering a new anti-avoidance regime, however there may be some double standards afoot.

The UK has been very keen to attract big business and companies (hence dropping its main corporation tax rate to 20%) and in the push to retain London as a key financial centre there is bound to be the temptation for politicians (from all parties) to consider "sweetheart" deals and attract mutinational HQs back to the UK. The pressure is very much on the government now that Scotland and Wales considering their own tax policies and with Brussels probing different countries' dealing with big business there is also a small but growning number of complaints from individuals who do not get "credit" from HMRC. Negotiations at all angles may be difficult. Whilst HMRC has a long history of offering sweetheard settlement deals to companies this practice looks increasing likely to be illegal under EC rules. 

 

 

 

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