Cadbury firms in tax row post €24.4m profits

The two Irish-registered Cadbury companies at the centre of the EU row over tax between them produced profits of €24.4 million in the 15 months to the start of January 2005.

Accounts filed for the IFSC companies show that the bulk of the profits were attributable to Cadbury Schweppes Treasury International, a firm involved in "international lending and related treasury activities". Neither this firm, nor its immediate parent, Cadbury Schweppes Treasury Services, had any employees at the time.

Cadbury Schweppes Treasury International recorded a profit of $17.02 million (€13.36 million) for the 15 months, marking a 70 per cent decline on the year to the end of September 2003.

Results in the earlier period had been boosted by a $38.4 million gain on the disposal of a subsidiary.

Shareholders' funds at the start of 2005 amounted to $873.8 million, compared to $869 million in the previous period.

The firm's profit and loss account swelled from $76.9 million to $81.7 million.

Despite the decline in profits and shareholders' funds, Cadbury Schweppes Treasury International increased its dividend over the period.

The accounts show that the firm paid $12.3 million in dividends for the 15 months, compared to $11.5 million in the year to the end of September 2003.

Cadbury Schweppes Treasury International was, at the time, 100 per cent owned by Cadbury Schweppes Treasury Services, the second company covered in the opinion issued earlier this week by a key adviser to the European Court of Justice (ECJ).

Philippe Léger, advocate general at the ECJ, said that firms setting up in the Republic to reduce their tax burden were not abusing EU law. The ECJ follows the views of its advocate general in about 80 per cent of cases.

Mr Léger's opinion was seen as a boost for the Republic's strategy of attracting foreign investment with a 12.5 per cent rate of corporation tax.

Cadbury Schweppes had claimed at the ECJ that the UK unfairly retained taxes on profits made by its Irish subsidiaries in 1996.

Cadbury Schweppes Treasury Services made a "non-repayable capital contribution" of $14.5 million to Cadbury Schweppes Treasury International in the 15 months to the start of January, 2005. The same contribution was made in the previous accounting period.

Cadbury Schweppes Treasury Services recorded profits of £7.6 million (€11.01 million) for the 15-month period. In the preceding year, the firm had made a profit of £7.5 million. Shareholders' funds fell from £521 million to £520.9 million.

Last month, Michael O'Grady, one of the State's Revenue Commissioners, worried that a win for Cadbury in the current case could give support to the argument that the EU should have a common consolidated corporate tax base. Mr O'Grady was speaking at a conference hosted by Deloitte. He said one of the claimed advantages of the common system would be that it would do away with the need for tax administrations to be "worried" about arm's length transfer prices between multinationals in the EU. This would be a source of concern, Mr O'Grady said.