EnterpriseFinancial MarketsLegalMobilityRegulationSmartphonesTablets

Ireland Readies EU Appeal Over Apple Tax Demand

Tom Jowitt is a leading British tech freelance and long standing contributor to TechWeek Europe

Google + Linkedin Subscribe to our newsletter 1 Comment

Irish eyes are smiling on Apple, as government readies appeal on tax ruling by European Commission

The Irish government is to submit an appeal against an European Commission (EC) ruling that it effectively gave Apple “state aid” over its tax arrangements in Ireland.

It comes after the EC in August ordered the Irish government to recover up to €13 billion (£11bn) plus interest in “illegal tax benefits”.

Irish Tax

The EC investigation began in 2014 and two years later concluded that Apple had been able to avoid taxation on almost all profits generated in the EU single market.

It blamed a structure which routed revenues through two “paper” headquarters in Ireland, as well as minimal tax rates in that country.

The EC said that Apple only paid an effective corporate tax rate that fell from one percent in 2003 to 0.005 percent in 2014 – a rate which other companies in Ireland were not subjected to. This effectively amounted to state aid, the commission said.

Apple is claimed to have received the illegal benefits since 1991, but investigators are only able to demand the Irish government recover up to ten years in unpaid taxes, dating back from the EC’s first request for information in 2013.

TaxesApple told TechweekEurope at the time it would appeal the decision, saying that the “European Commission had launched an effort to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the international tax system in the process”,

And now the Irish government is going to appeal the ruling, after the Irish cabinet decided in September to join Apple in its appeal.

According to Reuters, the Irish Finance Minister Michael Noonan said on Tuesday the appeal will be formally submitted this week.

“The government fundamentally disagrees with the European Commission’s analysis and the decision left no choice but to take an appeal to the European Courts and this will be submitted tomorrow,” Noonan told a European Parliament committee in Brussels.

Long Relationship

Apple has a long history in Ireland (well, long in technology terms), having opened its first office in Europe in County Cork in 1980.

Tim Cook used an open letter to European authorities to describe how Apple had remained in Holyhill through “periods of uncertainty about our own business” and provided jobs when Cork was suffering from high unemployment and extremely low economic investment.

Indeed, before the EC’s ruling, Apple planned to expand its Irish workforce by 1,000 to 6,000 staff. This obviously makes it a major employer in Ireland, which has enthusiastically courted technology firms to boost its economy.

But over the years, pressure on Ireland has grown over concern that big name tech firms were using it as a tax haven.

In 2013 US senator Carl Levin said the loophole had allowed Apple to achieve the “holy grail of tax avoidance” with a subsidiary that had no tax domiciliation, avoiding about $40 billion (£25bn) in US income taxes in 2012.

Aware of the growing international pressure, in 2013 Ireland’s Noonan said that he planned to close a legal loophole that allowed companies such as Apple to avoid income tax by establishing Irish-based subsidiaries as “stateless” for tax purposes. 

The measure made it illegal for a company to have no tax residence.

However that change did not affect a more commonly used tax structure, known as “double Irish”, which allows companies to funnel profits to zero-tax jurisdictions such as Bermuda. Or 000.5 percent, as in the case in Ireland.

Apple for its part has always maintained it has done nothing wrong or illegal and has blamed the global tax system.

How well do you know Apple? Take our quiz.