Friday 30 September 2016

Ireland has no choice but to appeal the EU ruling on Apple's tax affairs

Published 03/09/2016 | 02:30

Apple's CEO Tim Cook Photo: David Paul Morris/Bloomberg
Apple's CEO Tim Cook Photo: David Paul Morris/Bloomberg

Jarndyce and Jarndyce springs to mind at the vista of Apple's tax case going before the European Court of Justice. Yet go before the court it must.

  • Go To

Jarndyce and Jarndyce is the interminable legal proceedings forming the nucleus of the Dickens novel 'Bleak House' - a byword for droning delay. And bleak indeed is the prospect of a lengthy hiatus before clarity is offered regarding Apple and any Apple-esque arrangements between the Irish State and other multinational corporations.

This cannot be left to fester. The European Commission and the Court of Justice have a duty to accelerate the Apple case and need to agree that it will be treated as a priority.

Currently, we are led to expect a six to 10-year timeframe before a decision is forthcoming from the European judges. But it would be irresponsible of Europe to allow the issue to grind on for so long without resolution.

With billions of euro at stake, these will be hard-fought proceedings - all parties will be lawyered-up to the hilt.

Europe has thrown down the gauntlet to the stateless multinational Goliaths and others will be watching the court battle with interest - particularly in Silicon Valley and Seattle.

As for the Irish government, it has little choice but to enter the fray with a legal challenge to test Commissioner Margrethe Vestagar's view. We don't have the luxury of sitting on the sidelines and watching the heavyweights slug this one out. Inaction is a de facto acknowledgement that we colluded in a tax scam.

Enormous implications arise from the Commissioner's ruling and the Court of Justice is the best place for them to be legally tested.

Commissioner Vestagar is claiming that Ireland broke state aid rules for Apple and is due an estimated €19bn in back tax and interest - a somewhat contradictory position because she says other countries may be in line for a share of the loot.

This is simply the view of the Commissioner and her advisers.

While she may well have a moral case, it has not yet been established whether there is a sound legal basis for her position. Indeed, Apple and Ireland insist that no law has been broken.

Let's remember, the €19bn is an illusory source of revenue for the Irish Exchequer - it's as real as the Jarndyce fortune proved to be by the end of the Dickens novel, entirely gobbled up by professional fees. Even if we accepted the money, it might have to be portioned out in all directions. Plus, the money would have to be repaid to Apple if it should win its court action.

Ireland needs to challenge the ruling for various reasons. First and foremost, because Europe is trespassing on Ireland's tax sovereignty. In addition, Revenue's neutrality must be defended. If we accept what the Commissioner says, it suggests Revenue bowed to political interference with a sweetheart deal for Apple.

Ireland has more to lose here than Apple, for whom €19bn is no deal-breaker. It has €200bn lying offshore, after all. We need to continue attracting foreign investment to generate well-paid employment. And while the €400m from Apple in annual taxes is undeniably useful, it's the 5,500 Apple jobs that matter most to us.

Let me be clear, multinationals must pay a fair share of tax. It is contrary to corporate social responsibility to engage in aggressive tax avoidance and tolerance for such activities is waning. The European Commission's tough line on Apple follows cases against Amazon, Starbucks, Fiat and McDonald's.

However, taxation for the giant corporations is a global issue. By all means, let's close off loopholes - but countries have to co-operate, acting in sync.

As for small states such as Ireland, we must be allowed to make our way in the world.

Ryanair's Michael O'Leary suggests it's in France and Germany's interests to diminish Ireland's attractions for the tech behemoths - guess who'd step into the breach? I don't know if the facts back that up, but undeniably there are inconsistencies in Europe's approach to its members.

Investigations into state aid have taken place involving the Netherlands, Luxembourg, Belgium and Ireland - small countries. But Europe kept quiet about Volkswagen cheating on emissions for fear of offending Germany, while France is said to be allowed to breach the 3pc debt limit. Ireland wasn't even invited along to a key European post-Brexit meeting, although Germany, France and Italy were present.

Meanwhile, the multinationals are the ones providing jobs in Ireland, not Europe - which ordered Ireland to pay unsecured bondholders, regardless of our collapsed economy. Post-crash, investment from the multinationals, rather than Europe, helped the recovery.

I don't advance any of this as a reason to collude with multinationals in their calculated tax-avoidance policy. I suggest it for the purposes of bearing in mind that Ireland's best interests are not always top of the Brussels agenda.

Our jobs strategy is easy enough to understand. We compete for the roving multinational dollar - the dollar seeking a home where the natives subject it to the lowest tax possible. Thousands of jobs have resulted from this plan.

Problems arise from the tangled tax-avoidance tactics of the giant corporations we go a-courting, which are less easy to understand. Outrage and wounded feelings were Apple chief executive's Tim Cook's response to questions on ethics from RTÉ's Paschal Sheehy. We always try to do the right thing, he insisted. The right thing by whom, though? Why those billions offshore?

It served as a reminder that the Apple controversy is neither a financial nor a political issue, although it has traces of both.

In reality, it is an ethical conundrum. Is it morally right for a super-rich company to exploit loopholes to reduce its tax liability to a negligible level? And was it morally right of Ireland to facilitate such behaviour until 2014?

Ireland's leaders needed to create and safeguard jobs.

Faced with conflicting dilemmas, they chose the least damaging option for their people.

Apple's drive - gargantuan profits for shareholders - is a less compelling narrative.

Irish Independent

Read More