Who, what and why: Apple and Ireland in the tax dock
Published 29/01/2016 | 02:30
What's happening with Apple's tax situation in Ireland?
Apple and Ireland are currently waiting for the European Commission to issue a verdict on whether Apple has paid too little tax in Ireland based over a 10-year period. The verdict is expected in weeks.
What will happen?
We don't know, but Brussels has handed down some key judgments against other EU countries in recent weeks. For example, Belgium has been ordered to recover €700m from over 30 companies adjudged to have received illegal state aid via tax breaks. Separately, Apple has been in a settling mood in other European countries, agreeing to pay €318m to Italian tax authorities to help resolve a tax dispute there.
Why is the focus now shifting to Ireland?
Because this is where Apple's international corporate structure is based and where the bulk of its revenue and profit is initially assessed.
What happens if the decision goes against Apple?
Apple may have to pay Ireland a lot of back taxes, potentially into the billions. The actual case is against Ireland, not Apple. But Apple would clearly be the one hit hardest.
How much money are we talking about?
Estimates range from €200m to over €7bn. For instance, Bloomberg has estimated that some €60bn of gross profit could be counted, resulting in over €7bn to be reclaimed. Other estimates predict much lower sums, arguing that such cases in illegal state aid are typically in the millions, rather than in the billions.
If Ireland stands to gain millions or billions in back taxes, why is it siding with Apple against Brussels?
Because it's worried about its reputation among multinational companies, which employ 200,000 people here and are responsible for the lion's share of Irish exports.
So the Government has said that if the Commission comes down against Apple, it will appeal.
Does Europe have the power to do this?
Probably. It cannot dictate tax rates to Ireland. But it can adjudicate on whether Ireland gave Apple illegal state aid through the form of lower tax arrangements.
This distinction isn't fully accepted by Ireland, which insists that Europe doesn't have the legal competency to probe that far into the workings of our tax arrangements.
Ireland argues, for example, that letters of clarification between the Revenue and Apple are part of everyday tax process and aren't tantamount to government policy.
Such letters are right at the heart of the matter. Apple is adamant that it has done nothing but obey Irish tax law at all times.
Is Apple the only company in Brussels' crosshairs?
No. The Commission has just announced new rules allowing countries to tax multinationals at source. This could have major ramifications for Facebook, which has just announced a €1bn quarterly profit, and Google, which is under pressure after cutting a €165m UK tax deal.