Thursday 23 November 2017

EU ruled against Ireland in majority of tax cases

Apple CEO Tim Cook
Apple CEO Tim Cook
Donal O'Donovan

Donal O'Donovan

Three out of the four probes into Ireland's taxes completed by European competition regulators since 1991 have gone against authorities here, according to papers seen by the Irish Independent.

None of the Irish probes resulted in companies or sectors found to have benefited from a tax advantage being forced to pay back any money, however.

A fifth probe, into the taxes paid by Apple, is ongoing.

Excluding the current high profile investigations involving Apple, Starbucks, Amazon and Fiat, European Competition Authorities have investigated 65 cases in 15 countries of suspected "state aid" to companies through favourable tax rules since the advent of the common market in 1991.

That's according to documents provided by Competition Commissioner Margrethe Vestager to the European Parliament's Special TAXE Committee, which was set up in February to examine so-called tax rulings by member states - opinions on tax provided to companies by national authorities.

In Ireland, EU authorities ruled against special 10pc corporate tax rates that applied to companies in the IFSC and Shannon Free Zone and in the manufacturing sector following two probes in 1998.

At the time the standard corporation tax rate here was 32pc. Special rates were phased out by 2003.

Ireland slashed the standard corporate tax rate to the now iconic 12.5pc level after the rulings.

The standard rate cannot be challenged by the Commission because it applies to all companies.

In 2000 EU authorities launched a probe into a rule that allowed companies here to receive income from foreign subsidiaries tax free, if it supported jobs and investment.

In 2003 authorities ordered the closure of the scheme - which they said had only been used by a single company. Similar tax breaks in Belgium and the Netherlands were ordered to be shut at the same time.

In 2004, the then Finance Minister Brian Cowen was given the OK by Brussels for a scheme that excluded profits on the disposal of investor firms of shares in investee companies, but only after some details of that scheme were tweaked following discussions with Brussels.

A probe into the tax treatment of a handful of multinational corporations launched last year has since widened into a general investigation of tax rulings - formal and informal opinions provided by national tax authorities to companies in relation to their tax liabilities.

Multinational corporations that operate across national borders and often involve complex webs of connected companies often require such opinions simply in order to understand what taxes apply.

However, officials in Brussels fear rulings based on favourable readings of tax codes can constitute an abuse and put rivals at a disadvantage.

In December the Competition Commission sent a questionnaire to EU member states to gather information on tax rulings, including a request for a list of tax decisions granted to companies from the start of 2010 to the end of 2013.

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