The Irish Independent reports that British tax authorities have criticised Bank of Ireland for "a flawed attempt to exploit what it thought was a loophole" in the UK tax system.
The partially state-owned bank is being forced to pay £30m (€35m) in tax on a £90m profit linked to its Bristol & West subsidiary in the UK.
In a strongly worded statement, HM Revenue & Customs (HMRC), the UK tax authority, said Bank of Ireland had lost an attempt to avoid paying the tax.
The case itself dates back to 2003. It arose out of Bank of Ireland's transfer of a "swap contract" between its Bristol & West unit and another Bank of Ireland subsidiary.
A "swap" is a contract used by banks and business to manage the risks on investments.
All sides agreed that the swap was originally entered into for commercial reasons. It netted a £90m profit for Bank of Ireland that tax authorities said resulted in a £30m tax liability.
The bank argued that it did not owe £30m because the original swap held by Bristol & West had been cancelled and replaced by a new one.
The case finally went to a public tax tribunal, an independent legal process that decides on tax cases, in March this year. The tribunal upheld the HMRC's case and says that the tax is owed.
A spokesman for the tax authority in the UK said the case was a "major win".
Bank of Ireland has 56 days to appeal the tribunal's decision.
A spokeswoman for the bank declined to comment.
"HMRC will challenge avoidance schemes that risk denying the Exchequer vital tax revenues and will pursue to litigation when necessary," the UK's exchequer secretary David Gauke said.
Mr Gauke is a Conservative Party MP and the equivalent of a junior minister in the UK's coalition government. He has been an outspoken critic of tax avoidance as well as tax evasion in the past.
Last year, he outlined new proposals to counter "aggressive" tax avoidance schemes which are legal but are frowned on for seeking to minimise the amount that the authorities take in in taxes.
Bank of Ireland's UK tax bill comes ahead of its annual general meeting (AGM) of shareholders today in Dublin.
The bank will release a trading update to coincide with the event. It is expected to confirm that Bank of Ireland is in the best shape of any of the main Irish banks.
Margins at the bank are improving, thanks in part to the controversial decision to increase the interest rate that UK customers pay on their tracker mortgages. The end of the bank guarantee that banks had to pay for will boost that trend further.
In terms of mortgage arrears, Bank of Ireland is in better shape than its rivals.
One big question that remains ahead of today's meeting is how the bank plans to meet the Government's demand for savings of around 6pc in its wage bill.
The State owns 15pc of bank of Ireland, but Finance Minister Michael Noonan will abstain in a vote on directors' pay at today's AGM. The minister said he will not vote to support directors' pay until the bank produced a wage-saving plan.
The Irish Independent also reports that an average of five businesses a day are still going bust in Ireland – but the rate of collapse has eased, according to new figures.
Data from business intelligence group Vision-Net shows that 533 companies have collapsed into insolvency so far this year. But that is 20pc fewer than in the same period in 2012.
This is probably due to weaker firms having already gone to the wall while more resilient ones manage to weather the continuing economic storm.
The Vision-Net figures show that 68pc, or 361, of the insolvencies recorded so far this year have been liquidations. This compares to 400 firms that went into liquidation in the corresponding period in 2012.
There have been just 17 court-ordered liquidations so far in 2013, down from 33 in the first part of 2012. The number of receiverships notched up this year has fallen by a third, to 162. High-profile receiverships included Post Publications, the publisher of the 'Sunday Business Post'.
The number of examinerships recorded is 10, including the Irish arm of DIY retailer B&Q.
The process for engaging in the examinership process is being eased, making it more accessible to SMEs, said Vision-net.
Companies that can satisfy two out of three conditions related to turnover, employee numbers and the size of the balance sheet won't have to apply to the High Court to engage in the process.
Vision-Net also said that a total of €131.9m in commercial and consumer judgments had been awarded already this year, or an average of €76,875 per judgment.
Amongst the biggest were a €198,000 judgment secured against Kill International Equestrian Centre and €146,713 against Sligo firm O'Hargill Developers.
The top judgment secured against consumers was one for €2m. The top 10 judgments secured against individuals in the past two weeks alone have totalled €9.3m.
The Irish Times reports that
Taoiseach Enda Kenny has said he expects a response within a fortnight to an
initiative by the Government to engage with trade unions on plans to cut the
public service pay and pensions bill.
Mr Howlin said that Mr Mulvey would make contact
with the parties and see whether there was a basis for a further engagement that
might lead to an agreement.
Earlier yesterday the Opposition walked out of an
Oireachtas subcommittee hearing on revised estimates for the Department of
Public Expenditure and Reform.
The Irish Times also reports that
economic activity in the eurozone contracted again last month, prompting
speculation that an interest rate cut may be on the cards at next week’s
European Central Bank governing council meeting.
The yield on Italian 10-year government
bonds fell below 4 per cent for the first time in almost two and a half years,
while yields on Spanish and Portuguese debt dropped to their lowest level since
The disappointing economic output figures for the
euro zone emerged as separate data showed weak business activity in China and
the US. The flash PMI for the US fell to 52 last month, down from 54.6 in March.
The Irish Examiner reports that multinationals availing of permissive tax regimes could have their tax assessments ignored and be forced to pay the full amount, under plans released by the European Commission.Ireland will be asked to nominate representatives to sit on a board to identify ways companies are avoiding or minimising their tax, including through regimes such as that in Ireland and the Netherlands.
This is the latest development in the EU’s growing battle to ensure countries benefit from an estimated €1tn of tax being lost through avoidance and evasion annually.
While Ireland is not considered a tax haven, the country has been under severe pressure to increase its corporate tax rate and the tax structure that allows what is known as the “double Irish”.
The body, to be known as the Platform for Tax Good Governance, will monitor countries’ progress in tackling aggressive tax planning and clamping down on tax havens.
“The aim is to ensure that real and effective action is taken by member states to address these problems, within a coordinated EU framework,” said Algirdas Semeta, commissioner for taxation.
The platform will have about 45 members including a representative from each national tax authority, European Parliament, and up to 15 from businesses, academics, NGOs and other stakeholders. “This will also facilitate dialogue and exchange of expertise, which can feed into a more coordinated and effective EU approach against tax evasion and avoidance,” he said.
The 15 will be appointed by the Commission which launched a request for applicants to serve a three-year mandate with the first meeting to be held in June.
The platform will track two specific issues — member states progress on identifying tax havens and putting them on national blacklists; and blocking off opportunities exploited by companies to avoid paying their fair share of tax.
“These include reinforcing the anti-abuse provisions in bilateral tax treaties national legislation and EU corporate legislation. Any artificial arrangement carried out for tax avoidance purposes would be ignored and companies would be taxed instead on the basis of actual economic substance”.
The Department of Finance did not respond to a query on the Irish attitude to the platform but said the Irish presidency was working very closely with Mr Semeta and the Commission in tackling tax fraud and evasion.
“The issue of combating tax fraud and evasion is a priority for the Irish presidency. We are taking this work forward on a number of fronts in this area. We are currently preparing a Council response to the Commission Action Plan to strengthen the fight against tax fraud and tax evasion. We are working hard at the code of conduct sub group (chaired by Presidency) — on a proposal to combat double non-taxation and other tax evasion. We put forward a Vat anti-fraud package but achieving agreement on the package is proving difficult,” the department said.
While normally the spotlight is on Ireland for transfer pricing, the Netherlands has been used by some of the largest multinationals and in 2011 they funnelled some €57bn through the country using letter box companies.
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