Does European decision herald true pan-European tax accounting?

May 2005

Artists, Live Concert Industry

Marks & Spencer Plc v Halsey (Inspector of Taxes) European Court of Justice C446-03-
The Advocate General of the European Court of Justice had held that UK tax law, which allows group tax relief for losses in the UK only and does not allow a firm to deduct the losses of foreign subsidiaries, is in breach of EU law. Miguel Poiares Maduro, recommended that Marks and Spencer be allowed to offset losses made at its foreign subsidiaries against its tax burden in Britain. He said British tax law was in breach of EU law by refusing to allow companies to offset tax losses from overseas subsidiaries against British profits. “The principle of territoriality cannot justify the current restriction” he said adding that a blanket restriction on this practice far exceeds what is necessary to protect the cohesion of the British tax system. The advocate general said the only condition should be that losses from foreign units would not also receive fiscal benefits in the states abroad. Germany, France, the Netherland, Greece, Finland and Sweden all backed the UK Government’s position fearing they will have to repay billions of Euros if the court finds in favour of Marks & Spencer. Austria and Denmark already allow losses from foreign subsidiaries to be deducted.


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