European Union finance ministries stand to lose hundreds of millions of euros a year in corporate tax revenue after the bloc's highest court ruled Tuesday that they could not go after profits earned by subsidiaries in other EU countries as long as the businesses were not "artificial" arrangements to avoid paying taxes.
While potentially painful for high- tax countries like Germany, France and Italy, lawyers said the landmark decision could also help promote European integration by making cross-border expansion more attractive for companies.
In a case brought by Cadbury Schweppes, the world's largest candy maker, the European Court of Justice in Luxembourg said that national laws restricting the ability of a company to set up a foreign subsidiary in a lower-tax country was justified only when those operations were "wholly artificial arrangements."
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