The European Union has announced that it is ready to investigate a probe on the British government's "sweetheart" tax deal with Google. The move was fueled by a letter of complaint from Scottish National Party deputy leader Stewart Hosie asking the EU to check if the overly generous and unfair tax agreement constitutes illegal state aid.
BBC News reported that EU's Competition Commissioner Margareth Vestager will go over the letter and check if Google's tax settlement, which was signed together with UK chancellor George Osborne, amounts to a "sweetheart" deal
In his letter, Hosie stated that Google's tax payment arrangement to the UK revenue collection "did not disclose the methodology for the calculation of Google's tax liability." Moreover, it was mentioned that tax specialist in the UK have widely described the agreement as 'opaque.'
The EU's Competition Commission currently has around 2,000 state aid cases similar in nature to Hosie's concern. Under Vestager's leadership the EU's competition arm has forcefully taken down "sweetheart" tax deals signed by EU member states and large multinational companies in a bid to eliminate corporate tax avoidance.
In the last three months, the European Union has toppled multinational firms such as Fiat and Starbucks following investigations on state aid cases. It has secured payment of €1.25 billion companies in back taxes. More recently, the commission is investigating Ireland over accusations of lenient and favorable treatment towards Apple.
A spokesman of Vestager told Financial Times that these decisions "show that national tax authorities cannot give any company, however large or powerful, an unfair competitive advantage compared to others. This is illegal under EU state aid rules." These "sweetheart deals" have largely been frowned upon as violating the European Union's objectives.
The scrutiny will most likely put pressure on David Cameron, who was pinpointed as the one responsible for allowing Google to have more freedom and leverage over his administration. The Guardian noted.
Meanwhile, Pierre Moscovici, a senior tax policy official in Europe, revealed his plan to revive a method for corporations to file a single European tax form which would prevent "avoidance-friendly" governments from cooking up deals with tax-reluctant companies. As a result, it would block companies from funneling profits in European Union members due to biased tax payments that is made worse with lesser transparency.
Under the proposal, which would be known as common consolidated corporate tax base, would have companies follow a single set of rules when transacting with European Union members. However, this system will not curtail each country's right to set up their own corporate tax rates.
UK officials are urging the EU to pursue the investigation against Google to put an end to "cosy deals" and ensure that multinational companies pay their fair share of taxes the same way smaller companies and individuals do.
