Finnish tax authorities have taken the position that many Finnish multinational corporations have paid taxes on operations by their subsidiaries to the wrong countries. The situation has arisen through a stricter interpretation by tax authorities of the practice of transfer pricing.
Transfer pricing is used for transactions among different divisions of the same company. It can be misused to lower profits in high tax-rate countries and raise profits are operations based in countries with lower tax rates.
It is possible that Finnish authorities may seek up to two billion in taxes that they consider should have been paid in Finland, rather than in countries where some corporations have subsidiaries.
In the short term, the tighter regulations and subsequent higher tax bills will benefit the state. On the other hand, companies presented with the surprise of a large bill for back taxes may be forced into taking measures such as delaying planned investment or contracting new loans in order to pay up.
Nokian Tyres, which has received a tax bill for close to additional 30 million euros, has announced that it will appeal for a reversal of the decision, if necessary all the way up to the Supreme Administrative Court.