Marks & Spencer Wins Tax Case

As the British electoral campaign moves into high gear, the UK Independence Party is making a great deal of noise about Britain being run by Britons. Noting that most laws governing the British people come from a rather undemocratic Brussels rather than London (which has democracy issues of its own), they suggest that EU membership is a loser all the way around for Brits. The most recent decision by the European Union on taxes gives retailer Marks & Spencer hope of just treatment from Her Majesty's Treasury and a £30 million rebate. In other words, EU membership does help.

As noted in an earlier report, Marks and Sparks, as it is known in some quarters, had a bad Christmas, with sales coming in £50 million lower than expected. The CEO vowed to get the share price back to £4, or he'll admit failure. So, if this win stands, the company will enjoy quite a windfall. And it will be deserved.

The case stems from losses M&S suffered in its overseas subsidiaries. Under UK tax law, according to the BBC, "a company can offset losses from one subsidiary against the profits of another -- but only if both are in the UK." Well, M&S does a lot of business on the Continent and claimed that losses in France, Belgium and Germany should count equally with losses from Faversham, Birmingham and Gillingham. It made that claim to the Inland Revenue in March 2000 and lost. So, it appealed its tax treatment to Brussels.

Yesterday, the Advocate General, Poaires Maduro, told the European Court that in his opinion the UK tax code treatment of these losses was incompatible with European law. He might have added, it was incompatible with simple logic. Such tax treatment favors UK companies that don't do business abroad, thus favoring a structural trade deficit. The Advocate General's decision would merely level the playing field to the benefit of Britain as a whole.

Now, the AG is only an advisor to the European Court, which will have to rule formally later in 2005. But rarely does the court ignore the opinion of the AG. Which means M&S will be given justifiable tax relief thanks to Brussels when Whitehall erred. The UKIP might want to think hard on this. Is it better for government to be in "local" hands and make decisions that undermine the common good, or for it to be far away and support that common good?


© Copyright 2005 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.
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