“We get approached by the US frequently. Whether it’s Arizona, whether it’s Indiana, whether it’s North Carolina, we’re constantly being approached and they’re putting things on the table: ‘We can offer you this, we can offer you that,”’ he explained.
My impression is that the EU – dunno about post-Brexit UK – has more-extensive restrictions on state aid, whereas US states have a pretty free hand in competing with tax breaks and the like on a per-company basis.
State aid law prohibits EU member states from granting aid in a manner that distorts competition and the European internal market. The application of state aid control to tax issues represents a unique intersection between competition law and tax law and is likely new for many U.S. tax practitioners. There appears to be no direct parallel in domestic U.S. law.
EDIT: I believe that I recall a lot of concern during Brexit negotiations from the EU that the UK would permit state aid, and that this wouldn’t permit a level playing field, so I think that constraints on that were one thing that the EU sought in the TCA.
State aid proved very contentious during the negotiations, with the EU keen to ensure the U.K. couldn’t use subsides to allow British business to undercut the bloc and the U.K. determined to set its own rules.
The resulting compromise is just one area where this isn’t the end of the story — rapid work now needs to be done in order to make the agreement operational. Specifically, the U.K. needs to create a body to oversee its own subsidy control regime.
“David Frost has done well to negotiate broad overarching commitments on state aid, which give the U.K. discretion on how it wants to set up its own subsidy control regime,” said Alexander Rose, lawyer and director at law firm DWF. “However, the government urgently needs to publish details of this new U.K. regime, because it has already legislated to remove EU state aid law with effect from 11 p.m., 31 December 2020.”
There’s also a carve-out within the deal that allows for exceptions to state aid rules, Rose noted, provided the U.K. parliament or the Council of the European Union approves the money. It’s rarely been used as an existing power for the Council, but it’s important that the U.K. has a power that mirrors it.
This kind of arrangement is new and one where historical examples won’t prove very insightful. The outcomes of the first few fights will set the direction, a person familiar with the legal advice the U.K. government received during the trade talks said.
That appears to tally with the view of the U.K. negotiating team: “The state aid provisions are quite specific. They enable two completely different systems to operate but designed to accomplish rather similar things in the sense that there’s a set of broad principles that are agreed between us,” they said. “Some bits of the subsidy policy arrangements are subject to arbitration in a particular way others are not. It’s one of the tailored bits given the sensitivity of it.”
I dunno what the present situation is, though, or if the courts have even settled things.
EDIT2: More details on post-Brexit state aid changes:
My impression is that the EU – dunno about post-Brexit UK – has more-extensive restrictions on state aid, whereas US states have a pretty free hand in competing with tax breaks and the like on a per-company basis.
googles
https://taxexecutive.org/state-aid-what-it-is-and-how-it-may-affect-multinationals-and-tax-departments/
EDIT: I believe that I recall a lot of concern during Brexit negotiations from the EU that the UK would permit state aid, and that this wouldn’t permit a level playing field, so I think that constraints on that were one thing that the EU sought in the TCA.
googles
Yeah:
https://www.politico.eu/article/10-key-details-uk-eu-brexit-trade-deal/
I dunno what the present situation is, though, or if the courts have even settled things.
EDIT2: More details on post-Brexit state aid changes:
https://www.whitecase.com/insight-alert/state-aid-and-brexit-trade-agreement-whats-new-whats-not-and-whats-next