European Commission: Ireland must demand €13bn in back taxes off Apple
Apple has accused the European Commission of threatening future investment and job creation on the continent and said it is confident of overturning the order
THE European Commission has ordered that Ireland demands back taxes from Apple of approximately €13 billion.
Competition Commissioner Margrethe Vestager today announced the findings of the three-year State Aid investigation into the tech giant’s tax arrangements in Ireland.
The EU probe has found that Apple had been conferred with an unfair advantage as a result of tax rulings it received from the Revenue in 1991 and 2007.
The Irish government and Apple have always rejected allegations of wrongdoing and both separately intend to appeal the decision.
The European Commission concluded that Ireland granted undue tax benefits of up to €13bn to Apple.
“Member States cannot give tax benefits to selected companies – this is illegal under EU state aid rules,” Ms Vestager said.
“Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years,” she added.
Ms Vestager the arrangement allowed Apple to pay an effective corporate tax rate of 1pc on its European profits in 2003 down to 0.005pc in 2014.
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Apple has responded to today’s historic decision by the European Commission to require Ireland to collect up to €13bn in back taxes from the company.
"The European Commission has launched an effort to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the international tax system in the process,” said the company in a statement.
“The Commission’s case is not about how much Apple pays in taxes, it’s about which government collects the money. It will have a profound and harmful effect on investment and job creation in Europe.”
"Apple follows the law and pays all of the taxes we owe wherever we operate. We will appeal and we are confident the decision will be overturned.”
The company recently received planning permission to expand its facility in Cork by 1,000 jobs.
A special Cabinet meeting will convene tomorrow to discuss the ruling.
Finance Minister Michael Noonan discussed the matter with Independent Alliance TDs last night.
He also briefed Fianna Fáil Finance spokesman Michael McGrath.
The State’s reaction to the Commission’s ruling centres around five points which are that:
· The Government disagrees profoundly with the Commission’s analysis.
· Ireland did not give favourable tax treatment to Apple. Ireland does not do deals with taxpayers.
· Finance Minister Michael Noonan will seek Cabinet approval to appeal the Commission decision to the European Courts.
· No fine or penalty has been levied against the Irish State.
· This decision has no effect on the 12.5pc rate of corporation tax and is not about Ireland’s wider corporation tax regime. No other companies are subject to this decision by the European Commission.
The Finance Department has insisted that Apple got no special treatment from the Revenue Commissioners and that Ireland has “a robust case” in appealing the Commission’s ruling.
The purpose of tomorrow’s Cabinet meeting is to get face-to-face agreement on the appeal which a course of action Minister Noonan and the Department of Finance have repeatedly backed.
Opposition politicians have called for the back-taxes to be recovered and spent on public services and housing.
However, the government has argued that Ireland would suffer reputational damage if the State doesn’t appeal the decision and that even if the cash ultimately ends up in the State's coffers, it would have to be used to pay down the national debt.
A government spokesman pointed out that Apple will soon employ 6,000 people in Cork.
“When we talk about defending reputations we’re talking about defending jobs,” he said.
Meanwhile, members of the Independent Alliance said they are "shocked" by the European Commission's decision and said they are reviewing the Commission's statement issued today.
"We will consult further with Minister Noonan, his officials, Revenue, and our own independent experts," they said in a statement released on Tuesday afternoon.
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The Commission's statement says it launched its State Aid investigation in June 2014.
"The European Commission has concluded that two tax rulings issued by Ireland to Apple have substantially and artificially lowered the tax paid by Apple in Ireland since 1991.
"The rulings endorsed a way to establish the taxable profits for two Irish incorporated companies of the Apple group (Apple Sales International and Apple Operations Europe), which did not correspond to economic reality: almost all sales profits recorded by the two companies were internally attributed to a "head office".
"The Commission's assessment showed that these "head offices" existed only on paper and could not have generated such profits.
"These profits allocated to the "head offices" were not subject to tax in any country under specific provisions of the Irish tax law, which are no longer in force.
"As a result of the allocation method endorsed in the tax rulings, Apple only paid an effective corporate tax rate that declined from 1pc in 2003 to 0.005pc in 2014 on the profits of Apple Sales International," the Commission said.
Its statement said the "selective tax treatment of Apple in Ireland is illegal under EU state aid rules, because it gives Apple a significant advantage over other businesses that are subject to the same national taxation rules."
The Commission says it can order the recovery of illegal state aid for a ten-year period preceding the Commission's first request for information in 2013.
Ireland must now recover the unpaid taxes in Ireland from Apple for the years 2003 to 2014 of up to €13 billion, plus interest.
The Commission statement adds: "the tax treatment in Ireland enabled Apple to avoid taxation on almost all profits generated by sales of Apple products in the entire EU Single Market.
"This is due to Apple's decision to record all sales in Ireland rather than in the countries where the products were sold.
"This structure is however outside the remit of EU state aid control.
"If other countries were to require Apple to pay more tax on profits of the two companies over the same period under their national taxation rules, this would reduce the amount to be recovered by Ireland."