Brussels — The EU has sued the UK for failing to recover illegal tax breaks doled out to multinational firms, in the second legal move against the former member state this week.

Authorities still haven’t clawed back all of the €100m in tax breaks aimed at luring multinational firms to the UK territory of Gibraltar, more than two years after the EU ruled them illegal, the European Commission said in a Friday statement.

The tax measures “gave an unfair advantage to some multinational companies and had to be recovered by the UK and the Gibraltar authorities”, said Margrethe Vestager, the EU’s competition commissioner. “We have decided to refer the UK to the EU Court of Justice for failing to implement this decision.”

The court move comes days after the EU’s March 15 decision to escalate a dispute with Britain over its unilateral decision to delay implementing a key part of the Brexit deal relating to Northern Ireland.

The court disputes are likely to worsen the already fraught relationship between the two sides that has led to disagreements over the export of Covid-19 vaccines and the UK refusing to grant full rights to the bloc’s ambassador in London. The EU is still smarting from the UK’s threat — later withdrawn — to break international law last year and rewrite the Brexit agreement.

In the clash over Gibraltar tax breaks, local authorities still need to recover money from units of Mead Johnson Nutrition and Fossil Group, the EU said. So far, only20% of the illegal subsidy has been clawed back from two other companies, it said.

“The UK and the government of Gibraltar are working closely and with the commission on the case,” a UK government representative said. “The government of Gibraltar has already recovered some of the aid, and continues to work to recover the outstanding aid in compliance with the commission decision, and to bring this case to a satisfactory conclusion as soon as possible.”

The EU Court of Justice, based in Luxembourg, usually rules on disputes between regulators and EU member nations and can order governments to pay fines for not complying with EU rules.


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