EU vs Apple: Ireland's €13bn tax windfall will be shared
The European Commission announced today in respect of its 3-year state-aid case that it concluded Ireland granted undue tax benefits of up to €13bn to Apple. This is illegal under EU state aid rules, because it allowed Apple to pay substantially less tax than other businesses and Ireland must now recover the illegal aid.
Other European countries will have a right to claim some of the recovered taxes from Apple and there may not be much left for Ireland.
Michael Noonan, finance minister, said that he would seek Cabinet approval to appeal the decision before the European Courts.
This is necessary to defend the integrity of our tax system; to provide tax certainty to business; and to challenge the encroachment of EU state aid rules into the sovereign Member State competence of taxation.
It is important that we send a strong message that Ireland remains an attractive and stable location of choice for long-term substantive investment. Apple has been in Ireland since the 1980s and employs thousands of people in Cork. The company has continued to expand its operations in Ireland in recent times.
Apple is to also appeal.
Simply Noonan is appealing the case "to send a strong message" to other multinationals — but this is for public consumption rather than reflecting confidence in winning, while Apple wishes to maintain the line that it "complies" with all laws.
Commissioner Margrethe Vestager, in charge of competition policy, said:
Member states cannot give tax benefits to selected companies — this is illegal under EU state aid rules. The Commission's investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years. In fact, this selective treatment allowed Apple to pay an effective corporate tax rate of 1% on its European profits in 2003 down to 0.005% in 2014.
A key aspect of the rulings that has shocked so-called "experts" is that the Commission went to the heart of the issue by rejecting Apple's use of effectively fake Irish companies that just existon paper to book billions in funds tax free.
Finfacts has for years highlighted the fiction of being able to use shell companies that today are supposed to hold $216bn of Apple's foreign cash hoard, which in reality is in the United States.
Today's Commission ruling that two advanced tax opinions issued by the Irish Revenue to an Apple subsidiary in 1991 and 2007 were in breach of EU state aid rules, is a landmark blow against tax avoidance by large multinational firms in Europe.
“US companies are the grandmasters of tax avoidance,” said Edward D. Kleinbard, professor at the Gould School of Law at the University of Southern California and a former chief of staff to the congressional Joint Committee on Taxation.
“Nevertheless, because of the nature of US politics,” he said according to The New York Times, the Apple case “will be framed by the US as Europe overreaching and discriminating against ‘our team.’ ”
The EC ruling may well spur significant corporate tax reform in the US for the first time in 30 years.
The Commission-ordered repayments could end up costing American taxpayers under US tax law because multinational corporations with large foreign operations, like Apple, are allowed to claim a credit against their US tax bills for any foreign taxes paid, an offset that reduces their tax payments to the US.