Pepgo launches test case
Business and IT consultants AMS Management Systems has sown the seeds of a potential test case tackling tax discrimination across Europe by seeking permission from the UK Inland Revenue to place a UK employee in its Dutch company pension scheme.
AMS’s action is backed by the Pan-European Pension Group (PEPGO), an association of 20 multinational companies eager to launch cross-border pensions. Tax discrimination across Europe is seen as the last barrier to pan-European pension funds.
European finance ministers passed the occupational pensions directive in a move that was seen as a breakthrough for European pension funds, Mercer Human Resource Consulting, co-manager of PEPGO with the independent consultant Geoffrey Furlonger, dismissed the directive as meaningless.
“What we need is a breakthrough on tax harmonisation. A legal case, brought through the European Court, looks like the quickest and most effective route to provide this,” says European partner Mark Sullivan.
If the Inland Revenue throws out AMS’s request, a test case in the ECJ looks likely. The company’s Dutch scheme only caters for employees working in the Netherlands but AMS has requested that it and its UK employee be granted the same advantageous tax treatment while in the Dutch fund as they receive in the UK.
The Inland Revenue is expected to refuse AMS’s application as the UK, along with many other EU countries, discriminates between foreign countries’ occupational schemes and domestic ones. Consequently, it does not grant the same beneficial tax treatment available to domestic schemes.
AMS says a refusal of its application will lead it to seek a judicial review in the UK courts, from which it would, if necessary, seek referral to the European Court of Justice in Luxembourg.
Mercer maintains that if the ECJ eventually rules that the UK’s tax treatment is discriminatory and contrary to European law, this would open the way for multinationals to place their EU employees in one fund without suffering the existing discriminatory tax treatment.
Commenting on the case, Geoffrey Furlonger said: “the AMS application is particularly significant as it involves the two EU member states with the largest pension funds under management. It also involves an employee who intends to reside in a single country, which would be the case for the vast majority of members of future pan-European pension schemes.”