The European Union is investigating whether a broad anti-tax avoidance scheme in Britain gives multinationals more favorable terms compared with local companies.
The announcement of the in-depth investigation comes at a time of tortuous Brexit divorce negotiations between the EU and Britain.
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EU Commissioner Margrethe Vestager said she wants to make sure that the British plan targeting tax avoidance does not allow some multinationals to pay less tax than other companies, which would be against EU rules.
She said that "rules targeting tax avoidance cannot go against their purpose and treat some companies better than others." The British plan came into force in 2013.
The British government said it did not consider the rules incompatible with EU law but would cooperate with the investigation.
"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," the Treasury said in a statement.