Tuesday, February 21, 2006

A victory for the Single Market

Marks & Spencers have won their case in the European Court over group offsetting. UK companies now face the same tax risk when investing elsewhere in the EU as they do when setting up a subsidiary in the UK. This has to be a victory for the Single Market as it reduces the distinction between a UK company and a European company.

Worries about a loophole are ever present but would seem more of a problem for group offsetting, whether in the UK or abroad, than international group offsetting in particular. Allowing tax benefits from loss making subsidiaries creates the risk. Offsetting is worth this risk as it is an important tool to allow businesses to expand and challenge in new markets without facing greater tax risk than it does in its core business. Existing companies in other markets are in a good position to enter into insufficiently competitive markets and encouraging this kind of action is good for consumers and efficient business.

The concentration of financial services in London has been a huge benefit to the UK and is one of the key trends behind the strong performance of the UK economy over the last decade and the improvement in the public finances which we are seeing right now.

1 comment:

Dave Cole said...

What do you think about the Services Directive, particularly the country of origin principle?