U.K. tax rules for multinational firms face EU investigation

• U.K. tax rules designed to lure multinational firms will be probed by the European Union, making Britain the latest target of an EU tax crackdown just as Brexit talks stall.

The U. K. Treasury said it planned to cooperate with the European Commission investigation and that it believed the rules weren’t incompatible with EU law. The probe will target controlled foreign companies rules introduced by previous Chancellor of the Exchequer George Osborne that aimed to keep firms in Britain. The Guardian reported the probe earlier Wednesday, saying an announcement will come on Thursday.

“We are clear that all multinationals must pay tax on any profits they make in the U. K., and our rules prevent these profits from being artificially diverted overseas,” a Treasury spokesman said in a statement.

Ireland, Luxembourg, Belgium and the Netherlands have tried to battle the EU’s powerful antitrust regulator over tax incentives that attract big companies. Amazon. com Inc. was ordered to pay 250 million euros ( US$ 295 million) in back taxes to Luxembourg earlier this month. The EU is also suing Ireland for failing to swiftly recoup some 13 billion euros.

U. K. lawmakers criticized the tax program in 2013, saying “it has become easier for companies to avoid tax.” Osborne said a year earlier that the rules would “stop global firms leaving Britain as they were, and encourage them to start coming.”

The EU probe comes as U. K. negotiations on exiting the bloc have failed to make progress. EU governments agreed Wednesday to begin planning in case the U. K. and the EU can’t manage to start talks on trade by the end of the year.

EU officials have promised to expand action on illegal tax breaks, saying it’s a “very large priority” and there may be many more cases in the year to come. Investigating how national tax breaks for big corporations may violate EU state aid rules has been a priority for the commission over the last few years.