Irish lawyer – dodging the EU Code of Conduct

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Finfacts, one of the best sources of what is going on in Ireland, has reported:

Cruickshank, Ireland's leading firm of patent and intellectual property attorneys, has warned the Irish Government that unless it urgently revisits its recent changes to patent tax laws, Ireland could be turned into a corporate tax haven, without creating any local value. It could also be faced with an economically disastrous drain of research and development activities to offshore locations.

This is in response to an EU requirement that Ireland remove a ring-fence where special rates of corporation tax relief were offered for income derived from patent royalties in Ireland.

So what is the good lawyer's response to this obvious requirement (at least as far as EU law is concerned)? It's not, as you might think to say that the new laws should be abolished as they obviously make no sense and that Ireland should instead trade on its real commercial advantages (which it claims to be be plentifold but in which it clearly has no confidence). No, he does instead say:

We believe that the only effective action is to take the operation of the incentive out of the corporate tax system and place it into the Irish resident personal taxation system. Here, it can be directed solely to inventors and individual patentees, and to shareholders of R&D or patent-holding companies who are resident for tax purposes. This way, there can be no incentive for a corporate to use this as a tax reduction measure, as they have no personal tax against which they can offset tax free royalty earnings.

Let's be clear. This is not the whole story. The reason for saying this is in fact simple: the ring fencing rules to which the EU has referred in making its requirement of Ireland do in fact only relate to corporate taxes. Moving the advantage to personal taxation is simply a move to get round the EU Code of Conduct on Business Taxation.

Well, it might work for now. But I think it very likely that the response will be to extend the Code of Conduct to personal taxation. Then the cat will definitely be amongst the pigeons.