Thursday, November 18, 2010

Is Ireland stealing corporation taxes from the EU?

False invoices representing fake activities in Ireland might allow deductions in German CT charges?
That would be crude indeed! It may happen, but Ireland and Germany are obliged to investigate if the other treaty partner, to the Double Tax Agreement, a treaty, wishes. Anything this simple falls apart easily. The tax paid in Ireland might then be returned, but the deduction in Germany for the purchase, would be disallowed making it ineffective. Charges might follow in Germany. Even genuine matters with real but suspect transfer pricing issues, can be pursued by the Germans should they have suspicions. Perhaps they do not employ enough “Steuer”(?) Inspectors to do this, but the ball is firmly in their court.

The OECD have a model avoidance of double taxation treaty that coutries use, and mutually adapt in certain details, for their network of Double Tax Agreements. (DTAs) The Model DTA contains provisions on avoidance and ensuring that the correct level of profits of entities (or gains) are taxed in the correct jurisdiction. The HCPs (High Contracting Parties) jointly investigate and agree if there is a dispute. I have to say, in my experience, this has not happened for any of the cases I and my colleagues dealt with at the time, when I was in D16, Lansdowne House, which dealt with Multi-National Entities (MNEs).

Rare, but provision for it exists. There is much spin about these matters. That might also apply to the German side as to the Ireland side. The Germans might protest, but in response to domestic pressure.

Sarkozy may face similar domestic pressures, but Regional Aid has always been part of the EU parcel, as it is obvious that with the dismantling of borders and other obstacles, business for the core would pick up. That

they can successfully choose to impose higher taxes there

simply means that businesses that are inelastic in location are trapped and lower personal taxation results? Those that are elastic, will set up elsewhere, even outside the EU, if it suits them. It is not a problem specific to Ireland. What next? France takes taxes from every corporation in the world? Simply seize any articles entering France and hold them against “taxes due”? The Doublke Taxation Agreements all deal with these matters. He is simply posing and appearing tough, prior to going home to his ‘licious missus?

As the tax situation has already been addressed, he is presumably referring to that?

Or spinning!?

No comments: