UNIVERSITY OF GDAŃSK • MASARYK UNIVERSITY • PAVEL JOZEF ŠAFÁRIK UNIVERSITY • UNIVERSITY OF VORONEZH
http://www.ejournals.eu/FLR
IMPACT OF BREXIT ON CORPORATE TAXES IN THE
EUROPEAN UNION
TEREZA ČEJKOVÁ ∗
Abstract
So-called Brexit and its consequences for the United Kingdom and the Member States of
the European Union have been a major topic for several years. There are various
conjectures, theories and quality research to address the effects of both options - with or
without an agreement - on a variety of economic and political areas. In addition to
discussions on the conditions for the United Kingdom's withdrawal from the community,
the Union has been trying for many years to harmonize the Corporate Tax legislation.
There are ambitions to fully unify the rules and to introduce new stricter measures against
tax evasion.
In this article, the author examines how one topic affects the other, how important will be
the Brexit’s role in the Union's efforts to achieve corporate tax harmonization to date, then
she analyses some of the theories and expert estimates, compares them with relevant EU
legislation focusing on Corporate Tax obligations, and gives an overview of possible
endings. In conclusion, the hypothesis that the remaining Member States should unify
∗
PhD Candidate for Financial Law, Department of Financial Law and Economics, Faculty of Law, Masaryk
University, Czech Republic. Author specializes in European corporate tax laws and tax evasion. Author of
several papers based on research presented at national and international conferences. Contact email:
ter.cejkova@gmail.com.
No. 15 (3)/2019
quarterly
Financial Law
Review
39 Tereza Čejková
their approach to UK entities concerning tax policies as far as possible in order to avoid
confusion and difficulties in taxpayers' legal systems and to open the door to tax evasion,
will be refuted or confirmed in the conclusion of the article.
Key words: Corporate Tax, Brexit, tax harmonisation, CC(C)TB.
JEL Classification: K340, K2
1. Introduction
The next, and hopefully this time definitive, deadline for the United Kingdom to withdraw
from the European Union is set for 31st October this year. Negotiations have been going
on for several years and it is still unclear what Brexit will look like and what its
consequences will be in all possible fields - economic, political, and in the lives of citizens
and non-physical entities.
The Czech Republic is getting ready for the case of the so-called hard Brexit, a variant
where the United Kingdom is disconnected without an agreement on the subsequent
cooperation of the country with the European Union, by preparing the forthcoming Brexit
Act [Ministry of the Interior 2019]. It will primarily regulate issues related to the free
movement of citizens, access to the labour market, public health insurance issues, existing
supplementary pension insurance and building savings [KPMG 2019]. It is not only from
this act of the legislator that the withdrawal of such a strong state from the community,
directly or indirectly, will significantly affect a large number of relations.
Each relationship in the legal sense of meaning often entails some tax liability. The abovementioned
regulation provides a transitional period for each rule. British citizens will still
be subject to EU legislation on taxpayer's tax residency within the Czech Republic for the
taxation period in which the Treaty on European Union and the Treaty on the Functioning
of the European Union will not be applicable for the first time to the United Kingdom and
the conditions of the UK's withdrawal from the EU are not effective yet. However, this will
not apply to taxes levied in the form of deductions and for provisions about tax security in
these cases the UK citizens will not be considered as residents of the Czech Republic
from the moment of Brexit.
A more complicated situation will then arise in the case of taxing of internationally
operating corporations, which are expected to be the most affected by Brexit on both sides
[Freedman 2017: 79-90]. Other aspects of a Member State's disconnection, such as free
market restrictions, will inevitably lead to economic changes in the EU budgeting sphere,
which will have an impact on both direct and indirect tax revenues and in such a case rate
changes can be expected.
Impact of Brexit on Corporate Taxes… 40
The hypothesis of this paper is that the remaining Member States should unify their
approach to British entities as much as possible so that the consequent effects do not create
confusion and make orientation in taxpayers' legal systems more difficult and do not open
the door for tax evasion.
The methods will be used to analyse and interpret relevant legal regulations, compare them
and confront them with expert opinions. Due to the rapid development of the topic will be
widely drawn from newspapers and reports from political negotiations, for the basic
analysis will be used literature.
2. Corporate Tax Harmonization
How to motivate taxpayers to pay taxes is a subject to frequent lawmakers’ discussions. No
entity is happy to pay a significant amount of money gained through its own efforts to the
state treasury. But taxes levied on corporations are a significant item of income to the state
budget that cannot be replaced, so tax evasion must be avoided as best as possible. Better
than strict controls and harsh penalties is to motivate taxpayers positively. There are
various ways, simplifying the process is one of them. This includes unifying the rules for
different types of taxes, for individual branches, simplifying communication with the tax
administrator, and above all is setting fair rates.
While tax rules remain in the hands of the Member States and are considered to be one of
the major manifestations of state sovereignty within the European Union, the Community
has been in charge of taking measures to prevent tax evasion. This is a problem that
extends beyond the borders of a state and even the continent, especially in large
international corporations, not only giants such as Google, Amazon, Facebook, Starbucks
and others. These companies often avoid paying taxes and optimize income tax, and it is
not that difficult for them thanks to their international nature. This phenomenon is
growing along with the level of globalization and one of the European Union's main
functions is to maintain and improve the conditions of the single market.
The market is changing from local to global at different levels. There is free movement of
goods, shifting capital, confrontation of tax systems in the Europe. Although the tax
systems of the EU Member States are more or less similar, the rates may vary significantly.
Thus, under a single-country taxation regime, companies operating in more than one
country open up the possibility of shifting profits to countries with a more favourable tax
rate. Popular are intra-corporate loans, the operation of one branch in a state with a higher
tax rate as a representative of a branch located in a state with a lower tax rate, which is then
the real party to the transaction and profit goes directly to this one.
41 Tereza Čejková
A well-known case, the so-called Luxembourg Leaks, is sometimes marked as an important
factor in the European Union's efforts to take measures to prevent tax evasion. The
financial scandal was unveiled in the autumn of 2014 by the International Consortium of
Investigative Journalists (ICIJ, the issue of so-called whistle-blowers). More than 300 major
international companies (including PepsiCo, FedEx, IKEA and others) have made an
agreement with the state of Luxembourg to help them save hundreds of billions of US
Dollars by transferring profits from one state to another across the Luxembourg. Only
journalists were punished because such conduct was not illegal at this time.
Unfortunately, this is not an isolated case and such a significant reduction in income to the
state budget has a negative impact on a number of tasks of the state in the field of labour
and social application of its citizens. There are no means for redistribution to support job
creation and employment, the difficulty in eliminating inequalities and promoting social
mobility, and foreign investors cannot be encouraged to invest in a given country, with the
aim of increasing corporate tax revenues. However, since states cannot fight tax evasion in
this way alone, the European Union has taken up this challenge and is working to tackle
the problem at transnational level. The European Union seeks to prevent the spill-over of
tax obligations between states by introducing a so-called Common Consolidated Corporate
Tax Base.
2.1. Harmonization of Direct Corporate Taxes
International cooperation is essential to address these issues and tax unification is
considered to be a solution due to simplification of rules and better surveillance of the
international corporations. It runs on three levels:
- tax coordination,
- tax approximation,
- tax harmonisation [Široký 2006: 24].
Coordination involves negotiating bilateral or multilateral agreements between states on
basic tax institutes - preventing money laundering, reducing harmful tax competition,
seeking to set a minimum standard of transparency and systems of exchanging tax-relevant
information. A typical result of negotiations on tax coordination is a double tax treaty
setting conditions about taxing a subject in only one of the two or more countries being a
part to the treaty.
The concept of fiscal approximation appears in the context of the harmonization of
relevant legislation in the European Union. This is a phenomenon where the process of
regulatory convergence has slowed down or stopped completely. This is most often the case
Impact of Brexit on Corporate Taxes… 42
for political reasons, or simply because of the reluctance of Member States to continue to
act in that direction.
The target level is the tax harmonization, which, to put it simply, represents the resulting
state in which the relevant legislation and national tax systems, including the manner of tax
administration and process, are aligned at the required level and the applicable rules are the
same in different Member States.
Harmonization can be divided into three basic phases:
- first, it is necessary to determine the specific tax to be harmonized,
- then the tax base is harmonized - this is necessary for the fair determination of
the tax in the different tax systems and is therefore more fundamental than the
following stages,
- harmonization of the tax rate itself [Nerudová 2005: 13-19].
In our case, in addition to indirect taxes such as value added tax, corporate taxation was
determined for the above reasons to be harmonised. Negotiations began in 2001 and we are
currently in the second phase - harmonizing the method of determination of the tax base.
In 2004, a plan to introduce an EU Directive on Common Consolidated Corporate Tax
Base (CCCTB) was presented. Such a system already operates in the United States or
Canada on the basis of a formula designed to calculate a single tax base distributed among
the countries in which the corporation has an operating branch. Individual states are then
required to apply tax rates according to their own legislation [COM (2007) 223].
The states characterize their main objectives as the following:
- better use of the benefits of the Single Market,
- achieving fiscal neutrality between domestic and cross-border activities,
- elimination of excessive taxation due to the impossibility of cross-border
balancing of profits and losses,
- enabling a better solution to the problem of valuation of cross-border activities
between businesses within a multinational company,
- reducing compliance costs.
This proposed regulation was supposed to work alongside the national regulations and to
link to them at certain points. But the calculation was very complicated, which, given the
fact that it was not mandatory for companies to follow it, did not guarantee its great
popularity. Member States have never been able to agree on the text of the Directive
therefore it was never effective.
This legislative proposal is followed by the 2016 proposal for a directive. The revision of the
recast proposal is primarily divided into two separate provisions - one on the common tax
43 Tereza Čejková
base and one on the second phase of consolidation [SWD (2016) 341, SWD (2016) 342],
which makes more feasible to switch to the new regime for taxpayers, and for the first time
companies will have a single set of rules to calculate their taxable profits within the EU.
Further substantial changes are presented in the European Commission press release of 25
October 2016:
- Common Consolidated Tax Base to be mandatory for large multinational
groups that have the greatest capacity for aggressive tax planning, ensuring that
companies with global revenues above € 750 million annually pay taxes there
where they actually make profits,
- to address the current weaknesses in shifting profits for tax purposes,
- to encourage companies to finance their activities through equity or to take
advantage of the opportunities of the markets instead of borrowing,
- to foster innovation through tax incentives for R&D activities linked to genuine
economic activity.
„The common consolidated corporate tax base does not include corporate tax rates as they
fall under the sovereignty of individual Member States. However, a common consolidated
corporate tax base will create a more transparent, efficient and fair system for calculating the
tax base of cross-border companies, which substantially reforms corporate taxation in the
EU” [the European Commission 2016].
Transfer pricing options and preferential regimes, which are the basic tools by which
internationally operating companies most often commit tax avoidance, will be removed. As
the report also states, "as the Common Consolidated Corporate Tax Base will be mandatory
for the largest multinationals operating in the EU, companies most at risk of aggressive tax
planning will not resort to attempts to circumvent taxation at large.” It is obvious that such
companies tend to avoid paying taxes in amount that they are entitled to when it’s so easy
with minimal chance to be prosecuted by the authorities (see the case of the Luxembourg
Leaks where no of the companies was sanctioned, because their actions were not actually
illegal at the time).
This 'package' comprises three basic elements: (1) the Directive introduces a single set of
rules for calculating the corporate tax base, (2) it introduces creation of a single universal
sport to file a tax return (so-called one-stop-shop), and 3) explains how a corporation’s
taxable income is to be distributed among Member States, which is then taxed at the state’s
own tax rate. In addition to these basic pillars, however, it brings other important
innovations:
Impact of Brexit on Corporate Taxes… 44
- the Common Consolidated Corporate Tax Base Directive (CC(C)TB) is
mandatory for all companies generating a worldwide profit of over € 750
million,
- the regulation also unifies the definition of a permanent establishment for the
purposes of Tax Law. This is very close to the OECD’s definition as well as the
of the European Parliament's Recommendation on the Tax Obligation Directive
(ATAD) of June 2016,
- the directive introduces so-called super-rebate for companies contributing to
the economic growth of Member States, and special incentive schemes for
innovative start-ups and SMEs, and also encourages the use of non-bank
funding sources (equity lending).
The CC(C)TB Directive also includes some elements of the Anti-Tax Avoidance Directive
n° II (which, unlike the ATAD n° I, have not yet been approved by the Member States),
such as the General Anti-Abuse Rule (GAAR) to address (possibly) all options where abuse
of a tax system for the purpose of tax avoidance could occur, provided that such situations
do not fall under other specific rules, therefore the provisions will be applied on a
subsidiary basis.
The regulation, in its suggested form, also proposes a more efficient double-taxation
dispute resolution system within the European Union, which has so far represented some
uncertainty and excessive costs for business entities.
Further improvements are brought by the new rules for dealing with inconsistency of the
EU rules with third countries’ regulations. They are designed to prevent the use of gaps
between two different systems to benefit from possible taxation evasion, these gabs are
called hybrid mismatches. Hybrid mismatches occur when countries have different rules
on the taxation of certain types of income or entities, and corporations can benefit from
this situation by completely avoiding taxation in any of these countries. This proposal was
made directly at the request of Member States and should resolve the situation [Press
release of the European Commission 2016].
2.2. Harmonization of Indirect Corporate Taxes
Unlike direct taxes, the harmonization of indirect taxes is simpler, and the progress is
much more dynamic. In 1967 the Directive 67/227/EEC introduced the application of value
added tax in all Member States instead of the turnover tax levied at that time by some
Member States. Given through how many businesses in different countries a product goes
before reaching the final customer, this system is way more effective and value added tax
currently constitutes an essential component of financing the operations of individual
45 Tereza Čejková
Member States and also the European Union as a whole. Rates and tax exemptions were
left to rule by the Member States. This provision was followed by the Directive 67/228/EEC
defining the subject-matter of taxation and certain important concepts. The EU operates
the VIES information system to collect and share information important for the
administration of value added tax, and an information system called Inrastat to monitor
movement of goods across countries.
Divergent regulations of individual Member States has been removed by the Directive
77/388/EEC, which is currently replaced by Council Directive 2006/112/EC effective since
the beginning of 2007. Currently, the specific tax applied (first phase of harmonization)
and its basis are successfully harmonized, from which the amount of tax will be calculated
(second stage of harmonization). The rate cannot yet be harmonized for several reasons,
for example:
- interference with exclusive state sovereignty,
- intervention in the structure of public budgets,
- reducing fiscal policy instruments, and more.
Nevertheless, the rates of tax are adjusted at least in part so that the Directive 91/680/EEC
lays down the framework within which the rates may fluctuate, specifying a lower limit of
15 % at the standard rate and at least 5 % at the reduced rate. Some principles will also
apply – the country of destination principle (goods are taxed in the country of their
consumption), but the European Commission seeks to introduce the country-of-origin
principle, but this also implies a uniform rate so that the same goods are not taxed
differently according to a country of their origin. It would not therefore be appropriate to
argue that value added tax is only approximated within the European Union, because there
is the will, but not the right conditions.
Concerning the excise taxes, they are also applied on relevant goods in the country of
consumption and harmonization is embodied in the Directive 92/12/EEC and is linked to
special directives defining taxable products and their minimum rate [Šmejkal 2018: 167–
168].
At present, the introduction of the so-called digital tax is also a hot topic. It will affect
companies whose activities mostly take place in the digital sphere and which profit comes
from online content; some companies even exist only in digital form. Examples include
social media companies, collaborative platforms or online content providers. It is
particularly easy for such businesses to avoid tax obligations, as the tax administrator has
very few tools to thoroughly control them. In addition to the CC(C)TB Directive, the
European Commission is also preparing a regulation governing the principles for digital
permanent establishments and the principle of profit distribution with adjustments to the
Common Consolidated Corporate Tax Base Directive separately or together with a
Impact of Brexit on Corporate Taxes… 46
recommendation to change the rules vis-à-vis third countries, which is currently preferred
by the EU [European Commission 2018].
2.3. Tax Heavens in the EU
In terms of the issues discussed, it is worth mentioning the existence of some so-called tax
havens in Europe. When you say "tax haven," most people imagine some island states, such
as the Seychelles, the Cayman Islands, and others. However, the truth is that there are
several such states in the European Union.
Not surprisingly, considered to be tax heavens are some of the above-mentioned countries
that have a very low Corporate Income Tax rate, such as Cyprus (10 %), Ireland (12.5 %),
Liechtenstein (7.5-15 %), or Monaco, which exempts businesses from paying income tax in
the early years of their operations in the country or, for example, the British Virgin Islands,
where a flat-rate tax of $ 350 per year is levied instead of a percentage-based income tax.
Virgin Islands do not require companies to keep accounts, submit audit reports, and
official records are not accessible to the public.
A somewhat unusual tax haven remains the Netherlands, which has a tax rate of 20-25 %,
so not particularly low compared to other Member Stater (the EU average is 23 %), also
strictly monitors the accounting of companies and requires an audit of profit report
regularly. However, the business environment in the country is very favourable and offers
many advantages to companies, especially to the young and innovative ones, so some
companies often move their headquarters there.
The existence of such regimes is highly problematic, as there is nothing to prevent
companies from spilling their revenue through some of the above-mentioned countries
(methods are for example shifting revenue, creating representative offices, with a truly
acting branch located in a more favourable tax country, intra-corporate loans, and others),
everything remains legal.
The question is whether the Common Consolidated Corporate Tax Base Directive will help
in this case when the real problem lies in the level of the tax rates, which is still left to
national adjustments. The Anti-Tax Avoidance Directive (ATAD), which was to be
implemented this year, should bring a change. The regulation is based on the principle of a
minimum level of protection, which means that each country can impose even stricter
rules. The changes will consist mainly in the areas of tax deductibility of interest, taxation
of controlled foreign companies (so-called CFC rules), avoidance of so-called hybrid
discrepancies, taxation when leaving (exit taxation) and general rules against abuse of law
will be established. Expenditure that exceeds 30 % of tax operating profit before interest,
47 Tereza Čejková
tax and depreciation (EBITDA) will be considered excessive borrowing costs. Borrowing
costs are not only financial expenses such as interest on loans and borrowings, but also
related exchange rate differences, interest included in the cost of the asset, interest
capitalized on the balance sheet or interest expense from finance leases. The rule will not
apply to borrowing costs up to € 3 million, but the Directive allows the limit to be reduced.
In any case, the UK will no longer be subject to these regulations, and its own regulation in
this area - provision on Diverted Profits Tax introduced in 2015 - may even contravene the
EU at some points [Freedman 2017: 79-90].
3. Involvement of the United Kingdom
All the efforts of the European Union are carried out with the cooperation of all Member
States, including the United Kingdom. Although the negotiations on the country’s
withdrawal from the community have been going on for several years, it is still unclear
when and under what conditions this will happen. However, it is clear that the leaving of
such an economically strong state will have an impact on fiscal affairs throughout the
European Union.
The UK will lose benefits such as free market movement of goods and capital (the free
movement of people is questionable given the fact that the UK has never entered the
Schengen area) will have to give up full membership of the EU customs union but also it
will cease to be under the jurisdiction of the Court of Justice of the European Union, which
may have a significant impact on relations with citizens of other countries where some
legal uncertainty may arise.
Considerable losses can occur from those Member States that levy taxes on UK companies
located in their territory. Given that the sources of primary and secondary law will cease to
apply to these entities, this may be a reason for some companies to move abroad. Of
course, if some of them decide to stay, they will need to join the new regime as a third
country resident.
3.1. Customs Duties
On the part of the European Union as a whole, we will experience a significant decline in
the income of the EU budget, which is derived from taxes, duties and membership fees. If
there is no bilateral agreement, we will also feel it in monetary and foreign exchange
policies. The United Kingdom is an economically very strong player and one of those
countries that contributes significantly more to the common EU budget than it receives
from it (an estimated € 4-10 billion per year in favour of the European Union over the last
Impact of Brexit on Corporate Taxes… 48
five years). The absence of these incomes will be a difficult task to handle, but necessary to
somehow replace [Šmejkal 2018: 168-169].
In the case of customs, there are two possible solutions - either
a) it will be necessary to create new rules for imports and exports between the United
Kingdom and the European Union countries, partly based on mutual agreement,
which proves to be a difficult challenge, or
b) the United Kingdom will adopt the existing rules of the European Union and this
will establish continuity. Obviously, efforts are being made to minimize the
negative impact on both physical and business entities on both sides, and the
introduction of new or higher tariffs from one side or the other would certainly
represent a considerable burden on their activities and increase the difficulty of
making a profit. Such a tendency could lead to the entity's decision to withdraw
from one of the markets (given the number of potential customers in general, the
UK would probably lose its suppliers) and the negative consequences would be
passed on to consumers as well.
Consumers may also be negatively affected by the need to cope with some of the renewed
obstacles due to abandoning the free movement of goods in between the parties withholding
tax or transfer taxation.
3.2. Direct Taxes
In the past, the Member States, including the United Kingdom, have implemented a
number of the European Union directives with a direct impact on direct taxation, such as
the Mergers Directive, Directive on the Relationship between Subsidiaries and Parent
Companies, Directive on Interest and Royalty Taxation, and others. The application of
these directives allows, inter alia, to exempt from withholding tax dividends, interest or
royalties paid between a subsidiary and a parent company within the EU.
Half of all EU headquarters of third-country multinationals are based in the UK [Allen &
Overy 2016]. "Following Brexit, EU subsidiaries of UK holding companies will not be able to
rely on these directives to pay dividends or interest in their UK holding companies free of
charge withholding taxes" [Freedman 2017: 79-90]. In order not to lose its competitiveness
to other European countries, while avoiding any discriminatory taxation of foreign legal
entities operating on its territory, which could cause an outflow of desirable direct
investment, it can be assumed that the UK will seek to maintain at least the basic principles
of the directives.
49 Tereza Čejková
In the past, British finance minister George Osborne then commented on the imminent
departure of investors from the UK after its withdrawal from the EU. In 2016, he stated
that he would like to avoid this by reducing corporate income tax from 20 % to just 15 %,
which is the lowest rate of all the world's major economies, according to the Financial
Times.
Representatives of the European Union are to anticipate possible negative impacts that
have a negative impact on the potential tax benefits of legal entities. The United Kingdom
would be close to the above tax havens (e.g. Ireland with a 12.5 % corporate income tax
rate), which could be used to attract business entities to move to the United Kingdom and
pose a major economic threat to the EU Member States – great loss of tax income, higher
price of products that had to be imported from third countries, job losses and more. Judith
Freedman, an Oxford professor, is convinced that "it is possible that some companies may
move to an EU Member State as a result of the loss of these safeguards, especially cross-border
loss relief, although these are currently quite limited in any case" [Freedman 2017: 79-90].
3.3. Indirect Taxes
As mentioned above, the harmonization of indirect taxation within the European Union is
at a very high level, almost complete (except for the tax rate that remains in the dictation of
the Member States). Rise of expenditure on administration and control of indirect tax
collection can be expected [OECD 2016], while no significant changes in excise duties are
expected to occur.
However, there is a number of possible options for the outcome of changes in the Value
Added Tax. There are assumptions that the UK will retain the European Union directives,
although it has a possibility to deviate from it, but everything will depend on a concrete
agreement between the parties, and neither of them is yet clear on what the ideal situation
should look like. The economic interests of both the United Kingdom and the European
Union suggest that there will be no significant change in the UK VAT legislation and
strong economic relations will be maintained between the two parties.
Apart from the EU rules, the UK has bilateral double taxation treaties with a number of
countries. These contracts are usually based on the OECD model, so Brexit should not
affect their provisions in any way. However, there may still be a conflict of adjustments in
some jurisdictions (e.g. Italy or Germany) where the income of some persons could be
taxed far more than at present state [Clements 2016].
4. Conclusion
Impact of Brexit on Corporate Taxes… 50
Despite the fact that, as mentioned above, the UK has contributed far more to the EU
budget than it has benefited from, its membership of the European Union has helped it to
further develop its financial strength and support its position among the world's strongest
economies.
The negative effects on finance, and in particular taxes, appear to be predominantly on the
UK, while tax regimes in the European Union remain more or less unchanged. Experts talk
about the Brexit Tax [OECD 2016], which represents all the financial losses associated with
the high costs that the UK will have to incur after its withdrawal to introduce new regimes
and restore those whose effectiveness was due to its membership of the European Union
paused. The ratio between the level of taxes on income and gross national product per
capita will be negatively affected. The United States has also stated in the past that in
building economic relations, it intends to focus more on the European Union as a whole
[OECD 2016], and a similar approach can be expected of other developed countries with
economic interests in Europe.
The hypothesis set out in the introduction of this article, namely that the remaining
Member States should unite their attitude to British entities as far as possible so that the
consequent effects do not create confusion and difficulties in taxpayers' legal order and
open the door to tax evasion is fully confirmed, This is not so much a hypothesis, but
rather an intention that the European Union should adopt. It is evident from the above that
it is in the best interests of both parties to find a common compromise and to maintain
customs and tax cooperation at the highest possible level, and to try to maintain at least
partially the single market.
It would also be appropriate for the United Kingdom to remain bound by the existing case
law of the Court of Justice of the European Union, as it has built the single European
market environment for several decades and plays an important role in all trade relations
between Member States of the European Union. Maintaining its effectiveness for the
United Kingdom would increase legal certainty for all actors from the two parties and
greatly facilitate the introduction of new legislation. Community legislation aimed at
avoiding tax evasion by internationally operating corporations is of a very high standard of
quality and the United Kingdom could only benefit if it left it effective after leaving the
European Union.
As an unfortunate fact remains that, despite the negative effects on the United Kingdom in
particular, the European Union will be losing significant revenue to the budget gained by
taxing the income of large British corporations operating on its territory, value added tax
and, of course, membership fee. Given the economic strength of the leaving member state,
this outage will be significant, and it is not yet clear whether and how it would be possible
to be replaced.
51 Tereza Čejková
References:
Allen & Overy: Tax and the Implications of Brexit, Specialist Paper No. 8, 2016.
Clements, P.: Brexit; Tax Implications for Multinationals, Tax Journal, 2016.
Freedman, J.: Tax and Brexit, Oxford Review of Economic Policy, n. S1, 2017.
Nerudová, D.: Harmonizace daových systém zemí Evropské unie [Harmonization of tax
systems of European Union], Praha: Aspi, a.s., 2005.
OECD: The Economic Consequences of Brexit: A Taxing Decision, OECD Economic
Policy Paper No. 16, Paris, Organization for Economic Cooperation and
Development, 2016.
Široký, J. Daně v Evropské unii [Taxes in the European Union], Praha, Linde Praha, 2010.
ŠMEJKAL, V. (ed.).: Evropská unie po brexitu. Právně-institucionální budoucnost
evropské integrace [The European Union after Brexit. The legal-institutional future
of European integration], Praha: Wolters Kluwer CR, 2018.
Internet Resources:
Altaxo: Daňové ráje v Evropě [Tax Heavens in Europe], 2015. Available at:
https://www.altaxo.cz/poradna/zahranicni-spolecnosti/danove-raje-v-evrope.
Communication from the Commission to the European Parliament, the Council and the
European Economic and Social Committee: Implementing the Community Program
for Growth and Jobs and Improving the Competitiveness of Businesses in the EU:
Further Progress During 2006: COM(2007) 223, European Commission, 2007.
Available at: http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2007:0223:FIN:CS:PDF.
ČTK: Británie by mohla být daňovým rájem. Po brexitu chce firmám snížit daně [Britain
could be a tax haven. After Brexit, companies want to reduce taxes], iDnes.cz, 2016.
Available at: https://www.idnes.cz/ekonomika/zahranicni/britsky-ministr-financi-
chce-po-brexitu-snizit-firmam-dane.A160704_141126_eko_euro_kris
European Commission: Fair Taxation of the Digital Economy, 2018. Available at:
https://ec.europa.eu/taxation_customs/business/company-tax/fair-taxation-digital-
economy_en
European Commission: The Commission proposes a fundamental reform of the corporate
tax for the EU, 2016. Available at: https://europa.eu/rapid/press-release_IP-16-
3471_cs.htm
European Parliament: Daňové úniky: Podle poslanců podrývají členské státy
důvěryhodnost EU [Tax evasion: According to MEPs, Member States undermine the
EU's credibility], 2018. Available at:
http://www.europarl.europa.eu/news/cs/headlines/economy/20180126STO94140/da
nove-uniky-podle-poslancu-podryvaji-clenske-staty-duveryhodnost-eu
Evropský semester: Zdanění [European semester: Taxation], 2017. Available at:
https://ec.europa.eu/info/sites/info/files/file_import/european-semester_thematic-
factsheet_taxation_cs_0.pdf
ICIJ: ‘Lux Leaks’ Revelations Bring Swift Response Around World, 2014. Available at:
https://www.icij.org/investigations/luxembourg-leaks/lux-leaks-revelations-bring-
swift-response-around-world/
Impact of Brexit on Corporate Taxes… 52
ICIJ: Explore the Documents: Luxembourg Leaks Database, 2014. Available at:
https://www.icij.org/investigations/luxembourg-leaks/explore-documents-
luxembourg-leaks-database/
Anoušek, R.: Projekt opatření proti daňovým únikům při správě DPH [Project of measures
against VAT evasion], Diploma Thesis, University of Tomáš Baťa in Zlín, 2009.
Available at:
https://digilib.k.utb.cz/bitstream/handle/10563/9631/janou%C5%A1ek_2009_dp.pdf
?sequence=1&isAllowed=y
OECD: The Economic Consequences of Brexit: A Taxing Decision, 2016. Available at:
https://www.oecd.org/unitedkingdom/the-economic-consequences-of-brexit-a-
taxing-decision.htm
Pěknicová, K.: Ministerstvo vnitra připravilo brexitový zákon pro případ tvrdého brexitu
[The Ministry of the Interior has prepared a Brexit law for the case of hard Brexit],
Ministry of Interior, 2019. Available at: https://www.mvcr.cz/clanek/ministerstvo-
vnitra-pripravilo-brexitovy-zakon-pro-pripad-tvrdeho-brexitu.aspx
Prášilová, P.: Stručně a jasně: Společný (konsolidovaný) základ daně z příjmu právnických
osob [Briefly and clearly: Common (consolidated) corporate tax base],
Danovereformy.cz, 2016. Available at: https://www.danovereformy.eu/korporatni-
dane/articles/strucne-a-jasne-spolecny-konsolidovany-zaklad-dane-z-prijmu-
pravnickych-osob
Proposal for a Council Directive on a Common Corporate Tax Base, COM(2016) 685,
2016. Available at:
https://ec.europa.eu/taxation_customs/sites/taxation/files/com_2016_685_en.pdf
Svoboda, F.; Cigánková, K.: Brexit změní uplatňování srážkových daní a zajištění daně
[Brexit will change the application of withholding taxes and tax security], KPMG
online, 2019. Available at: https://danovky.cz/cs/brexit-zmeni-uplatnovani-
srazkovych-dani-a-zajisteni-dane
Taxation and Customs Union. Available at:
https://ec.europa.eu/taxation_customs/business/company-tax_en.