EU Sues U.K. Over Tax Breaks as Post-Brexit Skirmishes Mount


The European Union sued the U.K. for failing to recover illegal tax breaks doled out to multinational firms, in the second legal move against the former member state this week.

Authorities still haven’t clawed back all of the 100 million euros ($119 million) in tax breaks aimed at luring multinational firms to the U.K. territory of Gibraltar, more than two years after the EU ruled them illegal, the European Commission said in a Friday statement.

The tax measures “gave an unfair advantage to some multinational companies and had to be recovered by the United Kingdom and the Gibraltar authorities,” said Margrethe Vestager, the EU’s antitrust chief. “We have decided to refer the U.K. to the Court of Justice for failing to implement this decision.”

The court move comes days after the EU’s March 15 decision to escalate a dispute with Britain over its unilateral decision to delay implementing a key part of the Brexit deal relating to Northern Ireland.

The court disputes are likely to worsen the already fraught relationship between the two sides that has led to disagreements over the export of Covid vaccines and the U.K. refusing to grant full rights to the bloc’s ambassador in London. The EU is still smarting from the U.K.’s threat -- later withdrawn -- to break international law last year and rewrite the Brexit agreement.

In the clash over Gibraltar tax breaks, local authorities still need to recover money from units of Mead Johnson Nutrition Co. and Fossil Group Co., the EU said. So far only a fifth of the illegal subsidy has been clawed back from two other companies, it added.

“The U.K. and the government of Gibraltar are working closely together and with the commission on the case,” a U.K. government representative said. “The government of Gibraltar has already recovered some of the aid, and continues to work to recover the outstanding aid in compliance with the commission decision, and to bring this case to a satisfactory conclusion as soon as possible.”

The U.K. has struggled to recover other tax exemptions for multinational companies ruled illegal by the EU in 2019. GlaxoSmithKline Plc, Vodafone Group Plc, and BT Group Plc are fighting the EU’s decision on controlled foreign company rules at the bloc’s courts in Luxembourg.

The EU “remains in contact with the U.K. authorities on the implementation of this decision,” spokeswoman Arianna Podesta said on Friday.

The EU Court of Justice, based in Luxembourg, usually rules on disputes between regulators and EU member nations and can order governments to pay fines for not complying with EU rules.

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