Business Irish

Wednesday 20 March 2019

European Commission to find against Ireland in Apple tax probe - reports


The European Commission is to find against Ireland following the probe into its tax arrangements with Apple, according to financial newswire Bloomberg.

Bloomberg, quoting an unnamed source, said Ireland will probably face censure from European authorities within months.

However the Department of Finance rejected this, claiming no decision has been made. A spokesman added a date for a decision is not yet known.

In June of last year, Brussels accused Ireland of tax arrangements with Apple that gave an advantage amounting to state aid, and went against international guidelines.

A finding against Ireland would be a major blow for the Government, which has repeatedly insisted it has no case to answer.

Finance Minister Michael Noonan has said the Government will easily win the case, adding that Apple had paid everything "in accordance with law in Ireland".

The Apple probe dragged Ireland to the centre of the global controversy over ultra-low taxes paid by some big corporations.

The investigation into Apple came after powerful US Senator Carl Lavin claimed that Apple boosted its profits using a "sweetheart" tax deal with Ireland - secured by threatening to cut jobs here.

The European Commission published a 21-page technical document last year setting out the case for its formal investigation into the State's tax arrangements with the firm.

The Commission’s inquiry relates to the Irish branches of two Apple entities - Apple Sales International (ASI) and Apple Operations Europe. It focuses on two so-called tax rulings offered to the company by Ireland in 1991 and 2007, clarifying how the company's corporate tax rate would be calculated.

The Commission argues that Ireland's tax dealings with Apple, through the two rulings, broke the "arm's length principle" espoused by the Organisation for Economic Cooperation and Development (OECD).

This was created to deal with transfer pricing, which involves shifting of profits to low-tax jurisdictions to legally avoid taxes.

Brussels said that the 1991 ruling appeared to be "reverse engineered" to ensure a specific taxable income for Apple.

It also said that elements of the ruling were "motivated by employment considerations”

In a worst-case scenario, Apple may face a $19 billion bill if the Government ultimately loses and is forced to recoup tax from the company, according to JPMorgan Chase analyst Rod Hall.

 “The commission’s initial findings appear to be quite robust,” said Marco Hickey, head of EU, competition and regulated markets at Irish law firm LK Shields, which is not involved in the case. “Based on that, it would seem that they’re more minded than not to make a negative final decision against Ireland.”

An Apple spokeswoman wasn’t able to comment on any possible commission finding. The European commission declined to comment, while the Department of Finance said no final decision has been taken.

“The European Commission has not indicated a time line for a decision,” it said in an e-mailed response to questions.

“Our position remains that there was no breach of State aid rules in this case.”

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