Monday 21 May 2018

Six things you need to know about the European Commission Apple tax ruling

Shane Phelan and Donal O'Donovan

So, the European Commission has ordered that Ireland demands back taxes from Apple of approximately €13 billion.

What does this mean? What happens next? And, most importantly, where would this money go?

We have all you need to know:

1. So, what happens next?

The decision announced today will just be Round One in a case that could run for another five or six years. The Government's first move will be to appeal the Commission ruling to the EU General Court - proceedings there will be aimed at annulling the ruling.

2. What if the Irish Government's initial appeal fails?

If that fails, the Government can appeal to the EU Court of Justice. The initial appeal must be lodged within two-and-a-half months of the commission's finding being delivered.

3. What will happen any fines or back tax in the meantime?

Whether Revenue here must hit Apple with an immediate tax demand depends on the terms of the commission's decision. It will spell out the tax bill and when it must be collected.

If the settlement is in the low millions, the cash would be paid over, absorbed into State coffers and paid back to Apple in the event of a successful appeal.

If it runs to billions of euro, a more complex structure will be used to park the cash in an account where it will be left untouched, pending all appeals.

The Department of Finance has retained barristers in Ireland and the UK over the past two years to work on the appeal.

4. How do Irish jobs fare in all of this?

Apple regards Ireland as one of its long-term bases. Chief executive Tim Cook went so far as to say that even if the European Commission penalised its tax arrangements here, it wouldn't threaten the company's commitment to its 6,000-strong facility in Cork.

Current developments appear to back this up. Against the backdrop of imminent punitive action from Brussels, Apple recently went ahead with planning permission to expand its Holyhill facility for up to 1,000 new jobs. Cork was Apple's first major base outside the US, opened by Steve Jobs in 1980. It is the company's only wholly owned manufacturing facility outside the US.

5. What does this mean for other multinationals in Ireland?

As for the Irish Government, Apple is a bellwether case to show other multinational corporations that the country will defend investors against supranational fiscal probes.

6. How would this €13bn be spent?

Ireland has agreed to EU budget rules that specify that if "windfall gains" come our way in 2016 or 2017 the money will be used to accelerate debt reduction. A paper agreed by the EU Council states that after the recent economic turmoil this approach will help "reduce vulnerability to economic fluctuations and shocks". The ultimate affect of paying down more debt this year should be more spending power next year.

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