This article aims to describe the development in the field of corporate tax law in Iceland, from both legal and economic point of view, with a focus on measures taken to protect the tax base and in order to try to make Iceland an attractive place for investment and establishment companies. First, there will be a brief general description of the development of the corporate tax rate in Iceland since 2004 and an overview of new taxes that have been introduced for companies over the past ten years. Second, there will be an analysis of how the Icelandic legal framework provides for incentives for investment and establishment of companies in Iceland. Third, this discussion is to be followed by a section on the steps Iceland has taken in order to combat tax avoidance. Fourth, there is a general description of the economic development for the corporate taxation in Iceland since 1990 and fifth, there is brief discussion of the development of revenues from the corporate tax. Sixth, a short overview of the real investment in the Icelandic economy is given, and finally, the main conclusions of this article will be summed up with a short discussion on the main challenges Iceland is currently facing in the field of corporate taxation in today’s globalised economy.
One of the main trends in Finnish corporate taxation during the last ten years has been the lowering of the corporate tax rate. The decision to lower the corporate tax rate to 20% from the beginning of 2014 also changed the approach in reforming the corporate taxation as it was decided to stay on the grounds of a broad tax base and not to make loopholes in it with targeted exceptions.
The Finnish corporate taxation contains also some provisions that act as incentives for investment and the establishment of companies. However, the focus has been lately on the rules with purpose to protect the national tax base. Therefore, article handles both the specific anti avoidance rules and the application of the general anti avoidance rule on the cross-border transactions. Some particular challenges and the exchange of information are also taken into account before the conclusion with some ideas and aspects on future reforms.
Since the Tax Reform of 1992 Norway has had a tax system of relatively low tax rates and broad tax bases. Norway, along with other Nordic neighbours, did quite early substantially reduce its statutory corporate tax rate - reduced from 50.8 to 28 per cent as part of the 1992 Reform. After 1992 the rate has been constant at 28 until it was reduced marginally to 27 in 2014. Since 1992 the principal objective in designing the corporate tax system has been to ensure resource effectiveness. The role of the corporate (and capital) income tax is therefore to secure public revenue but at the same time minimising distortion. An important feature of the system is therefore that normal return on capital is taxed at the same rate, irrespective of whether it is earned as business income or not. The Report identifies three main challenges to the current corporate tax system. The first challenge discussed is the system’s effects on investments. It cannot be overlooked that the corporate tax rate in Norway is currently higher than the tax rate of many countries Norway is commonly compared with (e.g. other Nordic countries).
The Report suggests that this can contribute to a reduction in the level of investment in Norway.
The second identified challenge is the tax distortion between debt and equity finance. The Report briefly discusses neutrality in financing through equal tax treatment of debt and equity finance. The Report then discusses the implications and differences of an ACE and a CBIT model in this context.
The final challenge discussed is base erosion and profit shifting (BEPS). Differences in countries’ tax rules create vast opportunities for tax planning, and largely for the benefit of multinational enterprises (MNEs), inter alia through transfer pricing. The Report suggests that BEPS over time may imply a serious threat in maintaining the revenue from the corporate tax base. The Report then acknowledges that a reduction in the formal tax rate may only to some extent address the problem; which indicates a need to consider other supplementing measures. One such measure is the interest deduction limitation rule, made effective from 2014. The rule was introduced to address profit shifting in MNEs. More generally the Report recognises that Norway cannot freely introduce measures against BEPS following international obligations.
Finally the Report mentions the appointment of a Tax Commission in 2013. The Commission’s mandate is to review the Norwegian corporate tax system in light of international developments. The Commission shall deliver its report in the autumn of 2014.
This paper reports on an investigation of a recent decision by the European Court of Justice (ECJ) in case C-48/13, Nordea Bank Denmark, concerning the Danish rules for reincorporation of losses from permanent establishments situated in European Union/ European Economic Area (EU/EEA) member states other than Denmark. The article includes comments on various EU tax law aspects of the case - namely the restriction test applied by the ECJ, the justifications brought forward by the intervening governments and the question of proportionality - and examines the consequences of the Danish tax law going forward.