Introduction

What is the Apple tax ruling?

The EC issued a ruling on August 30th in relation to the tax arrangements of Apple in Ireland, where it has its European HQ. The EC said Apple had been granted selective treatment by Ireland through two tax rulings in 1991 and 2007. The EC has ordered Ireland to recover up to €13 billion from the tech giant.

Minister for Finance Michael Noonan indicated Ireland would appeal the decision “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”.

Q&A

Why doesn’t Ireland just take the €13 billion?

Ireland co-operated fully with the Commission’s inquiries.  Over the course of those three years, detailed and comprehensive responses were provided to the Commission demonstrating Ireland’s view that:

1. The appropriate amount of Irish tax was charged;
2. No selective advantage was given; and
3. There was no State Aid.

• The Government profoundly disagrees with the Commission’s analysis and had no choice but to take an appeal to the European Courts to annul the whole Decision.
• There was no departure from the applicable Irish legislation that applies to all Irish branch operations
• The Revenue Commissioners did not give preferential tax treatment to Apple
• Ireland does not do deals with taxpayers.
• No fine or penalty has been levied against the Irish State.
• This is a historic issue –the opinions no longer apply and Commission is arguing that Ireland should have known in 1991 what the OECD were only able to agree a solution for in 2010.
• Ireland does not seek to defend the outcome achieved by the company, but has been clear that the correct amount of Irish tax was charged and no selective advantage was given
• Over 70% of the Dáil voted to support the Government decision to appeal in September 2016.
• The European Commission has explicitly stated that “this decision does not call into question Ireland’s general tax system or its corporate tax rate”.
• No other companies are subject to this Decision by the European Commission.

What happened after that?

In August 2016 the Commission privately sent a detailed and technical legal document to the State, setting out the analysis that underpinned their conclusion.

This was later published in December 2016 and the committee will have seen that the Commission has three distinct and indeed contradictory reasons for the negative conclusion:

1. Their “primary”line of reasoning is that Ireland should have taxed all the world-wide profits of the two non-resident companies. This is the heart of the Final Decision and the basis for the enormous recovery amount estimated publicly by the Commission.
2. The second and “subsidiary”line of reasoning is that the Irish branches of the companies should have paid more Irish tax than they did on the basis of a different transfer pricing methodology.This is only referred to in outline in the Final Decision and the Commission have not specified a basis for calculating the recovery amount on this basis, although it would likely be significantly smaller than under the primary line of reasoning.
3. The third “alternative”line of reasoning is that the Irish legislation allowed the Revenue Commissioners to exercise discretion which conferred a selective advantage on Apple.This is also only referred to in the Final Decision and the Commission have not specified a basis for calculating the recovery amount on this basis.

Why is Ireland appealing? Shouldn’t we just take the money with all the challenges we face as a country?

Three reasons on why it is necessary that Ireland appeal the decision:

· 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.

Main reasons for taking the appeal:

1. It is simply untrue that Ireland provided favourable treatment to Apple.

The Chairman of the Revenue Commissioners has stated emphatically that:

• There was no departure from the applicable Irish tax law by Revenue;
• There was no preference shown in applying that law; and
• The full tax due was paid in accordance with the law.

2. The Commission is undermining the fundamental principle of international tax: that tax should be paid where the value is created.

3. In the Decision, the Commission are attempting to re-write Irish Corporation Tax legislation.  Taxation is a core Member State competence, which is enshrined in the EU Treaties.

What happens next?

The Government is of the view that there was no breach of State Aid rules in this case and that the legislative provisions were correctly applied.

By appealing the Decision the Government is taking the necessary course of action to vigorously defend the Irish position.

Ireland has done nothing wrong here.  We have a proven track record in international tax reform and a strong commitment to meeting the best international standards.

We are mindful not to damage the important appeal that is now before the European courts.