The European Commission (EC) has proposed that the UK should be sanctioned if it does not agree a “tax good governance” code of conduct after the country’s withdrawal from the EU.
The EC suggested that after withdrawal from the EU, the UK is likely to use tax independence to try gain competitiveness, under pressure from US tax reform. There will no longer be a legal requirement for the UK to exchange information with EU member states on tax matters, The EU’s corporate tax directives would cease to apply to Britain. The key risk for the EU, according to the EC, is targeted and strategic UK tax measures to attract investment and business.
The Commission suggested any future UK-EU agreement should include a tax good governance clause and a code of conduct on business taxation, mirroring the existing EU Code. These would be accompanied by requirements on exchange of information, anti-tax avoidance measures, and public country-by-country reporting for credit institutions and investment firms. It remains unclear to what extent the UK government would accept such an agreement.