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A surprising ruling from a top EU court means that the UK may be able to discriminate against EU nationals who have been granted the right to live and work in the UK after Brexit.

This decision has huge implications for millions of EU nationals in the UK, some of whom have been resident (and working) in the UK for years, and also raises questions about the meaning of equal treatment throughout the EU.

The Court of Justice of the European Union (CJEU) has upheld a UK rule that bars some EU citizens in the country from accessing benefits. The rule applies to those who have “pre-settled status”, which is one of two new statuses created under the EU Settlement Scheme allowing EU/EEA nationals (and their family members) to remain in the UK post-Brexit. Broadly, those who can show they had lived in the UK for five years or more are entitled to settled status, while those with a shorter period of residence get pre-settled status. So far, over 2.3 million people have been granted pre-settled status.

The rights of each status are largely the same, but with one vital difference. In 2019, the UK government introduced regulations requiring those with pre-settled status to show another “right to reside” (typically meaning they are in work) before they can claim welfare benefits.

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The case in question concerns CG, an EU national woman with pre-settled status, who came to Northern Ireland in 2018. She subsequently fled a domestic violence situation and has been living in a refuge with her two children. She applied for – and was refused – universal credit on the grounds that her pre-settled status did not entitle her to access benefits in the UK.

Law Centre Northern Ireland persuaded a first-tier benefit tribunal to take the unusual step of referring the case to the CJEU, to ask whether this restriction was discriminatory, and whether EU nationals with pre-settled status should therefore have the same access to benefits as UK nationals.

The ruling

Without much explanation, the court ruled that people in the UK with pre-settled status cannot rely on the right – enshrined in the treaty on the functioning of the EU – to equal treatment on the grounds of nationality. The court also considered whether EU nationals could challenge being denied benefits as discriminatory within the meaning of the Free Movement Directive, which lays down residence rights and conditions for some EU migrants. The view was that these people first had to meet certain conditions, usually being in work.

However, the court suggested that while the UK was entitled to withhold benefits from CG, it must check whether doing so would violate her fundamental rights as contained in the Charter of Fundamental Rights of the EU. These include the right to live in dignity, the right to private and family life, and the best interests of the child.

What is particularly interesting about this case is CG’s position as a woman and a mother. The Free Movement Directive, like other EU free movement laws, is biased in favour of men – taking no account of periods of childcare, care for disabled or elderly relatives, or of periods of instability caused by fleeing from domestic abuse. These social-security risks all disproportionately affect women.

The court of appeal of England and Wales faced exactly the same questions in the case of Fratila in October 2020, but reached a dramatically different conclusion. It ruled that people with pre-settled status were entitled to the protection of EU law from discrimination on the ground of nationality, and should be entitled to claim benefits in the UK.

The UK government appealed to the supreme court, but the case was put on hold pending the CJEU’s judgment in the case of CG. As the CJEU’s ruling has not unequivocally endorsed or prohibited the UK rules, it seems likely that there will now be further hearings. Many claims will be put on hold while we wait for these cases to be resolved.

Post-Brexit UK and EU law

Beyond its implications for EU citizens with pre-settled status, the CG case is a good example of how, even after Brexit, EU law remains relevant in the UK. The facts of the case arose before the transition period ended, when EU law still applied, and the court’s judgment is binding throughout the UK.

This case now presents a peculiar possibility. The UK government will probably argue, in a counterintuitive about-face, that EU law should be applicable in the UK, and that the supreme court should disregard UK national courts in favour of listening to the wisdom of the CJEU.

But if the UK government is allowed to maintain its exclusion of pre-settled status as a route to benefits, that exclusion is unlikely to be a blanket one. Individuals may have scope to argue, on a case-by-case basis, that a refusal of benefits would violate their fundamental rights.

What may seem impossible to employees is common practice for multinationals: they shift their profits around the world until they no longer have to pay taxes on them. A global minimum tax on corporate profits could put an end to tax evasion. The chances of this happening are better than ever.

This sounds like a fairy tale: The whole world is supposed to agree on a global tax. And it is powerful corporations such as Amazon, Google and Apple that will be expected to pay the tax. This could soon become reality – at least according to the finance ministers of the G20 countries. They are working on a global minimum tax for international corporations and a digital tax for Internet giants.

Europe loses 170 billion annually to tax dodging

The problem is well-known – and massive. According to calculations by the Polish Economic Research Institute, the member states of the European Union lose 170 billion euros in revenue every year as a result of tax tricks. Money that is urgently needed, especially during the Corona crisis, for example to create new jobs or to finance strained healthcare systems.

46 billion of the 170 billion are lost through the shifting of private assets to tax-friendly countries, 64 billion are lost to cross-border VAT fraud. And 60 billion euros are shifted by corporations through legal tax shifts to countries with low or no profit taxes. This is exactly the loophole that the international community now wants to close.

What would be unthinkable for employees and small businesses is legal for mega-corporations. Alphabet, for example, the mother company of Google, transfers its European profits to Bermuda. The island in the middle of the Atlantic has no corporate profit taxes – and probably not much else to do with Google. However, one of the corporate headquarters of the Internet giant is located in Bermuda. That’s where European subsidiaries of Google transfer high fees for the license and use of the search engine. This reduces their profit and saves the company from annoying taxes within the EU.

Global minimum tax of 12.5% could raise 100 billion

A global minimum tax for companies aims to put a stop to this tax trick. The idea is that if there is a unified minimum tax all over the world, corporations will no longer be able to shift their profits to countries without taxes. A tax rate of 12.5 percent is under discussion.

Corporations would still be able to shift their profits back and forth. But according to the concept, if a company sends profits for example from France to Bermuda, the domestic government could impose a 12.5 percent tax on the money shifted. Such a global minimum tax could generate up to $100 billion (about 84 billion euros) a year, the OECD group of countries estimates.

The finance ministers of the G20 countries are also currently considering a second tax idea: a digital tax. This would mean that Internet giants such as Amazon and Apple would pay taxes not only at their headquarters, but also where they generate their sales.

A global minimum tax has been a topic of discussion for years

However, many experts agree that a global tax reform has never been as possible as it is now. The reason: After Donald Trump blocked the idea for years, the new U.S. administration under Joe Biden is now pushing the concept forward. U.S. Treasury Secretary Janet Yellen wants to end global tax competition with a minimum tax. The fact that the United States, the world’s largest economy, is on board could help achieve a breakthrough for the global tax.

A letter from Millionaires: “Humanity is more important than our money”.

Meanwhile, support for higher corporate taxation is also coming from unexpected quarters. The International Monetary Fund (IMF), for example – usually an advocate of large corporations – is calling for crisis winners and the rich to pay more for a limited time. Even Amazon boss Jeff Bezos, whose company would be affected by the higher tax, supports raising corporate contributions.

Last year, 83 millionaires from various countries wrote an open letter. They demanded “permanently higher taxes for the richest people on this planet, for people like us. The appeal ends with the words, “Tax us. Humanity is more important than our money.”

Iceland has undertaken the largest trial of a 4-day-week, globally. It has been such an outstanding success that 86 percent of Iceland’s employees have either already adopted it, or at least have the possibility of working shorter hours. This experiment has shown that working shorter hours while getting paid full wages is beneficial for both the employees, by improving their health, happiness, and productivity, as well as the employer, as it produces positive economic results and greater profits.

One percent of Iceland’s employees worked shorter hours
In 2015, due to pressure from the public and the labour union, the government of Iceland and the municipal council of Reykjavík initiated the worldwide most extensive experiment on reduced working hours. Over the period of four years 2.500 employees from 100 enterprises worked an average of 35 to 36 hours instead of 40 hours, while getting paid in full. This trial was extremely successful, leading to a change in work-time regulations.
This trial included over one percent of Iceland’s labour force, working in various occupational groups. Childcare and nursing homes were as much part of the experiment as hospitals, schools, service centres, or public/municipal administration offices. Moreover, this also involved “nine to five”- jobs as well as shift-work. After two years of academic research and evaluation of results, it became clear that a reduction of working hours is not only possible, but beneficial to all.

Gudmundur Haraldsson, researcher of the British think tank ALDA (European Association for Local Democracy), states that: “the Icelandic shorter working week journey tells us that not only is it possible to work less in modern times, but that progressive change is possible too.”

4-day-week increases happiness, health, and productivity
It was identified that employees with reduced workhours experienced less stress and the risk of burnouts decreased. They felt happier, were able to spend more time on recreational activities, housekeeping, hobbies, be more active and spend extra time with their family. All of this did not interfere with the quality or productivity of their work. On the contrary, in most cases, they performed equally as well, or better and got things done quicker.

This can be attributed to the fact that employees are more focused and efficient. The government and municipal administration did not have additional expenses, as the trial was cost-neutral.

Will Stronge, research director at Autonomy – a think tank investigating the Icelandic experiment, states in summary: “This study shows that the world’s largest ever trial of a shorter working week in the public sector was an overwhelming success and it shows that the public sector is ready for being a pioneer of shorter working weeks – and lessons can be learned for other governments.”

Iceland as a model for other countries

More and more countries are open to experimenting and testing shorter workhours. Spain announced a similar country-wide trial of a 4-day-week in spring. Up to 6.000 workers will participate over a three-year period. Companies in New Zealand and East-Tyrol have also reported their successful attempts.

The Icelandic study has already had a considerable impact. Since the end of the trial, many labour unions have negotiated new work-time regulations. 86 percent of their workforce are working reduced hours or at least have the possibility of doing so.
“A shorter work-week is the future, there is no going back” says a participant of the study.

Author: Kontrast/Lena Krainz:
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