|UK companies which have subsdiaries operating in Ireland may challenge the UK's Government's decision to tax the Irish operations at a higher rate of tax than they pay here.
According to a report in today's Irish Independent, moves by the UK government to put Ireland on a "tax blacklist" could have major reprecussions for UK firms operating here which benefit from the benign tax environmnent. The UK government is claiming that the profits earned here are British and should therefore be taxed at British corporation tax rates which are in the order of 30pc. This compares with the 12.5pc rate which will come into effect in Ireland in 2003.
While this move is expected to be challeged in the courts, it is likely to have major ramifications for the subsidiaries of UK companies operating here, tax experts warn.
The move co-incides with attempts by the Swedish government to move on overseas subsidiaries of Swedish companies which are operating in tax havens. Like the UK, the Swedes are claiming that these subsidiaries should pay tax at Swedish rates. It is now feared that other EU countries could follow suit.