Every member state of the recently enlarged European Union has one or more tax rules which contravene European Community treaty law, according to a PricewaterhouseCoopers study.

The research analysed the eight domestic tax legislation areas - absence of cross-border relief, controlled foreign company regime, company migration exit charges, deferral only for domestic transfers, domestic versus foreign dividends tax treatment, the imputation system, thin capitalisation and transfer pricing.

The study found that the EU countries with the most tax illegalities are the UK, with all eight areas arguably in breach, and Denmark and France, both with seven areas in breach.

At the other end of the scale, with only one illegality each, are Cyprus, Estonia, Lithuania, Malta and Slovakia.

All of the ten accession countries who joined the EU on May 1 this year - with the exception of Latvia and Slovenia - have no more than two breaches each.

Overall, the results of the study show that, of the 200 potential tax illegalities, 45 per cent were found to be in breach of EU law and therefore illegal.

Peter Cussons, international corporate tax partner, PricewaterhouseCoopers, said: "Under EU law, one member state cannot discriminate against individuals or companies from another member state.

"However, our survey findings illustrate that all EU member states have at least one type of tax legislation in place which does discriminate. For example, a UK company can only claim tax relief under domestic law on losses relating to its UK subsidiaries and not those based abroad.

"This discourages cross-border activity and discriminates against UK companies investing on the continent," he said.

PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services for public and private clients.