Bye Bye transfer payments (so long Irish economy)

Akrasia

The European court of Justice has ruled today that European countries can pass laws forbidding corporations from transferring income from one state to another for the purposes of avoiding tax.

Ireland's exchequer takes in billions every year through this transfer pricing mechanism as we have a 12.5% tax rate which is very favourable compared to our European neighbours

n a ruling on a Finnish case, the European Court of Justice in Luxembourg decided that states can refuse to accept as tax-deductible expenses the transfer of income from a subsidiary in one state to a parent company in another state.
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The court ruled that allowing companies total freedom to decide where profits would be taxed would undermine the system of the allocation of the power to tax between member states.

The court said such freedom would force states to renounce their power to tax company profits in favour of another state.

Such a situation would encourage what it called 'purely artificial arrangements' in which groups of companies would set up head offices in states that apply the lowest tax rates.

On this basis the court ruled that the Finnish government was entitled to introduce a law that gave Finnish-based subsidiaries of foreign companies less favourable tax treatment than Finnish-based subsidiaries of Finnish-based parent companies.

http://www.rte.ie/business/2007/0718/taxruling.html?rss

This is a highly significant ruling which could see Ireland's balance of trade badly affected, severely reduce taxable income available to the Irish exchequer and might herald job losses in the financial services sector.

The era of free money is over.

The Irish pseudo economic house of cards is tumbling before our very eyes.

mike65

I don't see the law having much impact. I'm open to correction but most transfers with repsect to this state involve the USA, no?

heres a quote from Forbes

BRUSSELS (Thomson Financial) - The EU's highest court has ruled as lawful tax measures stating that a unit resident in Finland cannot deduct intra-group transfers to a parent company in another EU member state from its taxable income.

The court said in a statement that 'to allow such deductibility would undermine the objectives of allocating the power to impose taxes among the Member States and of preventing tax avoidance.'

Mike.

Time Magazine

It's also easily worked-around by intra-group purchases. "Hello Intel Ireland, I would like to buy one semi-conductor. How much would it cost?" "Hello Intel France, that'll be €1bn please."