Bright Shiny New Ireland
Posted on 05/02/2006 7:55:46 PM PDT by Murtyo
Edited on 05/02/2006 8:01:30 PM PDT by Admin Moderator. [history]
The Advocate General, the top legal advisor to the European Court of Justice, has said that a British law that applies a 'top-up tax' to eliminate the difference between Irish and British corporation taxes, may be unfair to companies with Irish registered subsidiaries.
His gave his opinion for the court in a case taken by the confectionery company Cadbury against the British tax authorities.
The Advocate General argues that the British law discriminates against companies that have subsidiaries in low tax countries like Ireland, and acts as a deterrent to companies that might seek to set up businesses in low tax countries.
Cadbury challenged the British law when the UK authorities sought to apply an extra tax charge to the profits of two IFSC regisited subsidiaries, Cadbury Schweppes Treasury Services (CSTS), and Cadbury Schweppes Treasury International (CSTI), which had already paid Irish corporation tax, which is significantly lower than UK corporation tax.
The UK Inland revenue sought an extra tax payment of £8.6m sterling from Cadbury. The two subsidiaries had been set up in Dublin to reduce the tax bill payable on treasury activities within the group.
The Advocate General argues that establishing a subsidiary company in another EU state in order to enjoy a more favourable tax regime is not, of itself, an abuse of the EU treaty right of freedom of establishment.
He also argues that the British legislation is unfair because it treats domestic subsidiaries and subsidiaries in higher tax countries differently from subsidiaries in low tax countries like Ireland.
But the Advocate General also argues that states do have a right to interfere with EU fundamental freedoms in order to counteract tax avoidance. He says EU case law has strictly limited these interventions, but that it is legal to limit the rights of a company to avoid tax if the company establishes a 'wholly artificial arrangement' with the sole intention of avoiding tax.
The court says such arrangements must be decided by national courts on a case-by-case basis, taking into account such factors as the subsidiary's activity and its economic value to the parent company.
These tests could have big tax implications for companies established in Dublin's IFSC. Germany in particular has been a critic of the IFSC for causing losses to the German tax authorities, as German companies have established numerous subsidiaries managing billions of euro in Dublin to reduce their tax bill.
Bright Shiny New Ireland
Damn, that's hideous.
Give it twenty years worth of city grime and it will look like something out of Bladerunner.
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