Single Tax Market

When the UK joined the Common Market, it adopted a European tax, VAT. Many people thought that there would be no further effect on the UK tax regime. How wrong they were. In recent years, European institutions have increasingly intervened in the field of direct taxes. A Directive concerning mergers and divisions has required changes to capital gains tax, for example, to deal with cross-border mergers, and another Directive has made a start towards a common system of withholding tax on interest and dividends. However, it is the European Court of Justice which is currently having the most direct effect. Its decisions are often based on principles of non-discrimination and freedom of establishment enshrined in the EU Treaty. The most recent example, involving ICI, is discussed on page 2.