GSK, Vodafone Among Firms Fighting EU Clawback Order
GSK, Vodafone Among Companies Fighting EU Tax Clawback Order
(Bloomberg) -- GlaxoSmithKline Plc, Vodafone Group Plc and BT Group Plc are among more than a dozen companies that have challenged a European Union order forcing the U.K. to claw back millions in tax breaks, adding to the list of potential EU flash points ahead of Brexit.
Glaxo and Vodafone filed separate challenges with the EU General Court in Luxembourg on July 5, a day after BT. As many as 14 companies filed similar appeals, according to the tribunal’s website. The U.K. last month also sued the European Commission, asking the EU’s second-highest court to annul the regulator’s April order.
EU Antitrust Commissioner Margrethe Vestager in April said an investigation had found some corporations in the U.K. had received an improper benefit from British anti-tax avoidance rules. Amid the country’s efforts to exit the EU, Vestager signed off on a decision to order it to recoup unfair tax subsidies.
Vodafone said it challenged the EU decision. According to its last financial statement, Vodafone said “that the Group’s Luxembourg financing activities are properly established and operate in accordance with EU and local law.”
Vestager has made the fight a linchpin of her tenure as EU competition commissioner, irritating chief executive officers and politicians along the way. The decision is one of a series of cases involving the likes of Apple Inc., Amazon.com Inc. and governments over tax deals that allow them to attract big business.
At least 56 companies, including Diageo Plc, Pearson Plc and Compass Group Plc, had come forward since the EU probe started in 2017. They estimated their tax liabilities at about 1.35 billion pounds ($1.7 billion), according to data compiled by Bloomberg Tax. The final bills may now be much lower because the EU didn’t outlaw the entire program.
The EU court challenge marks the start of at least two years of legal quarreling in the tribunals in Luxembourg -- courts that the U.K. was keen to sever ties with through Brexit -- currently scheduled for Oct. 31. Any ruling at the lower court could be appealed to the EU’s Court of Justice, which would add another two years of litigation.
The commission’s April decision said the U.K. exemption was partly justified. It didn’t specify which firms unduly benefited from it.
The British corporate financing exemption, introduced in 2013, allowed companies to pay little or no tax on income from interest payments on loans received from a foreign unit through an offshore subsidiary. The EU regulator said that it considered the exemption illegal when the financing income stemmed from U.K. activities.
The exemption was modified at the end of last year in a way that no longer raises concerns, the EU has said. The commission declined to comment on the U.K. court challenge.
--With assistance from Richard Bravo.
To contact the reporters on this story: Stephanie Bodoni in Luxembourg at sbodoni@bloomberg.net;Hamza Ali in London at hali69@bloomberg.net
To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net, Penny Sukhraj
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