Sunday 18 March 2018

Ireland says it has 'no case to answer' on Apple as Europe finds against Luxembourg and Netherlands

European Commissioner for Competition Margrethe Vestager. Photo: AP
European Commissioner for Competition Margrethe Vestager. Photo: AP

Sarah Collins in Brussels

The EU has ruled Fiat and Starbucks benefitted from illegal tax advantages from Luxembourg and the Netherlands, upping the likelihood that Brussels could also find against Ireland and Apple.

The European Commission said Luxembourg and The Netherlands artificially reduced the amount of tax that Fiat and Starbucks had to pay, amounting to savings of €20m-€30m for each company. Competitions Commissoner Margarethe Vestager ordered the two countries to recover the money and end the practice. While insisting the decision would not "prejudge" future cases, Ms Vestager warned other EU countries to take notice and make sure companies are taxed where they make their profits.

"I do hope that there is food for thought in companies in Europe and in tax authorities in Europe in these two decisions," she said yesterday. "It's important for countries - not only those here in question but other countries - to consider if they're on the right track."

The Department of Finance had no comment on the Commission's decision, but said that Ireland had not changed its position on its dealings with Apple. A spokesman said the country has "no case to answer" on Apple and "will pursue every avenue to defend our position" if the Commission finds against Ireland.

The decisions came after a 16-month investigation by the Commission into so-called tax rulings, or "comfort letters", issued by tax authorities to clarify how company taxes will be calculated. The EU investigation includes deals made with Apple in Ireland, Amazon in Luxembourg and a Belgian tax scheme, which are still ongoing.

Under EU state aid rules, comfort letters in themselves are not illegal.

But the Commission said yesterday that Luxembourg and The Netherlands "endorsed artificial and complex methods to establish taxable profits for the companies" which it said "do not reflect economic reality" and are therefore illegal under EU rules.

The investigation focused on the practice of "transfer pricing", where profits are shifted abroad to other companies in a group based in low-tax or no-tax countries.

This gives multinationals an unfair advantage, as smaller companies don't have the scale to move their profits around.

Jim Clarken, Oxfam Ireland chief, said the Government should force companies to publish where they pay their taxes and that a future decision on Apple could mean a "windfall" for the Irish exchequer.

"The effects of austerity meant that there wasn't enough money in the pot. Well, here's money that's in the pot," Mr Clarken told the Irish Independent.

"The veil of secrecy is being lifted on corporate transactions and corporate tax."

Meanwhile, personal finance website WalletHub has released its latest S&P 100 tax rates report, providing analysis of the 2014 rates at which S&P 100 companies - collectively worth more than $11 trillion as of the end of September - are taxed at the state, federal and international levels.

It found that S&P 100 companies pay roughly 24pc lower rates on international taxes than US taxes.

Technology companies, including Apple, Cisco Systems and Google, are still paying more than 25pc lower rates abroad, continuing the trend from 2013. And the report also found that the average S&P 100 company pays an 11pc higher tax rate than the top 3pc of consumers.

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