Wednesday 28 September 2016

Tax ruling will harm, not help, warns former EU watchdog

Published 02/09/2016 | 02:30

Neelie Kroes, former EU competition commissioner, famously tackled the multinational mobile phone companies over outrageous roaming charges Photo: Jock Fistick/Bloomberg News
Neelie Kroes, former EU competition commissioner, famously tackled the multinational mobile phone companies over outrageous roaming charges Photo: Jock Fistick/Bloomberg News

The EU decision to force Apple to pay €13bn in back-taxes is a misuse of state aid rules and raises serious questions about the rule of law in Europe, according to a blistering intervention by former European Competition Commissioner Neelie Kroes.

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The controversial ruling that Ireland provided illegal state aid to Apple will undermine rather than help global efforts to tackle tax avoidance, she said.

The Dutch politician, who oversaw competition enforcement across the European Union, during the financial crisis weighed into the controversial state aid ruling in an opinion piece written for 'The Guardian' newspaper.

Ms Kroes pulled no punches as she accused her successor Margrethe Vestager of attempting to rewrite corporate tax rules in a way that "raises serious questions about legal certainty and the rule of law".

"EU member states have a sovereign right to determine their own tax laws. State aid cannot be used to rewrite those rules."

The decision to order Apple to pay taxes dating back more than a decade that had not been sought at the time was particularly worrying, she said.

"It is a fundamental principle of tax law that changes will not apply retroactively. Companies (as individuals) should know what their fiscal obligations are up front and should be able to plan with them.

"When tax rules change, they do so for the future only and there are strict limits to the reopening of tax assessments for the past."

While there is broad agreement that multinational corporations pay too little tax, tackling that issue should come from a transparent legislative process within the EU and through consensus building in international forums, such as the OECD, she said.

State aid enforcement was not the appropriate tool to drive forward tax reform, she said,

"It is a tool to address instances where a member state has made an exception to its own rules and given a specific company an advantage," she wrote.

Echoing the view of Apple chief executive Tim Cook in his interview with the Irish Independent yesterday, she said the approach being taken by Brussels would harm rather than boost competition.

"You cannot change the rules of the game through ad hoc state aid enforcement, and then seek retroactive recovery for unpaid taxes. Doing so would be fundamentally unfair and would harm competition, growth and tax income in Europe. And it raises serious questions about legal certainty and the rule of law. "International corporate tax principles dictate that companies pay taxes where value is created. In the modern world, companies create value through design, marketing and intellectual creativity.

"It is where those activities take place that the profits really originate," she said.

For Apple, that would means tax on global profits are due in the US, not Ireland.

Neelie Kroes was an EU Commissioner from 2004 to 2014, first in charge of Competition and then as head of the EU's Digital Agenda.

She's now a director of Uber and Salesforce.

Irish Independent

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