Apple and Ireland believe EU’s €13bn tax ruling can be overturned

30 Aug 201622 Shares

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Apple and Ireland have labelled the EU decision as contradictory and say they will see it overturned

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Both Apple and the Irish Government are prepared to fight the EU and appear confident the EU’s €13bn decision can be overturned.

Apple has warned that the EU’s decision that it must repay €13bn in taxes plus interest in Ireland will have a harmful effect on investment and job creation in Europe. Both the Irish Government and Apple are prepared to appeal the decision.

European Competition Commissioner Margrethe Vestager today (30 August) ruled that Apple benefited from a 1pc corporate tax rate in Ireland between 2003 and 2014.

She said that two Irish incorporated companies of the Apple group – Apple Sales International and Apple Operations Europe – attributed their profits to a “head office” that existed only on paper.

‘The Commission’s case is not about how much Apple pays in taxes, it’s about which government collects the money. It will have a profound and harmful effect on investment and job creation in Europe’
– APPLE

“As a result of the allocation method endorsed in the tax rulings, Apple only paid an effective corporate tax rate that declined from 1pc in 2003 to 0.005pc in 2014 on the profits of Apple Sales International,” Vestager said.

She said that this tax treatment was illegal under EU state rules and ruled that Ireland must now recover the unpaid taxes for the years 2003 to 2014 for up to €13bn.

Both Apple and Ireland’s Finance Minister Michael Noonan have vehemently rejected the EU Commissioner’s ruling.

Apple warned that the ruling could have a harmful effect on investment in Europe.

“The European Commission has launched an effort to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the international tax system in the process.

“The Commission’s case is not about how much Apple pays in taxes, it’s about which government collects the money.

“It will have a profound and harmful effect on investment and job creation in Europe.”

Apple added: “Apple follows the law and pays all of the taxes we owe wherever we operate. We will appeal and we are confident that the decision will be overturned.

Ireland mobilises to fight Europe

Vestager’s ruling is to be fought by the Irish Government, Noonan confirmed.

“It is important that we send a strong message that Ireland remains an attractive and stable location of choice for long-term substantive investment.  Apple has been in Ireland since the 1980s and employs thousands of people in Cork. The company has continued to expand its operations in Ireland in recent times.”

‘This illustrates the contradiction at the heart of the European Commission’s decision.  While requiring Ireland to recover the tax sums, the Commission is also acknowledging that the sums may in fact be taxable in other jurisdictions’
– MICHAEL NOONAN, MINISTER OF FINANCE

Noonan said he will now seek Cabinet approval to appeal the Commission decision to the European courts. Ireland has a period of two months and 10 days to bring an appeal.

Noonan said that the EU’s requirements that the amount of unpaid taxes could be reduced if other countries demand Apple pay more taxes on its profits and if US authorities require higher payments are contradictory.

“This illustrates the contradiction at the heart of the European Commission’s decision.  While requiring Ireland to recover the tax sums, the Commission is also acknowledging that the sums may, in fact, be taxable in other jurisdictions.

“The European Commission is also incorrect to state that profits allocated to the Apple companies’ head offices were not subject to tax in any country under a specific provision of the Irish tax law. This refers to a mismatch between different countries’ tax rules, which by definition cannot be the responsibility of Ireland alone.

“Notwithstanding the right of appeal, Ireland is legally obliged to recover the alleged state aid from Apple in the interim. Given that this money may ultimately have to be returned to the company in the event of a successful appeal, the money can be held in escrow until the case has concluded,” Noonan said.

Apple Store image via Shutterstock

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Editor John Kennedy is an award-winning technology journalist.

editorial@siliconrepublic.com