26th Oct 2016

Ireland appeals Apple ruling, after 'intense' talks

  • Dublin: Not the first time Ireland has been forced to deny that it was a tax haven (Photo: Giuseppe Milo)

The Irish government narrowly avoided a split on Friday (2 September), before agreeing to appeal a European Commission ruling that ordered tech-giant Apple to pay the Irish state €13 billion, plus interest, in unpaid taxes.

The three independent MPs in Ireland’s ruling coalition earlier in the week were said to have “balked” at the idea of appealing a ruling that, on the face of it, allowed Ireland to pour up to €19 billion into its exchequer.

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But in the end, during Friday’s “intense” 30-minute cabinet meeting and after three days of internal strife, an agreement was clinched to order the attorney general to initiate proceedings at the European Court of Justice.

In exchange for the independents’ support, ministers from the Fine Gael party, the centre-right senior coalition partner, agreed to a “full review” of tax arrangements for multinationals in Ireland to be carried out by an outside expert.

The deal came despite the fact that a similar review was already carried out two years ago.

It also came despite concerns, a senior cabinet source told EUobserver on condition of anonymity, that the review “risked” giving the impression that Ireland had other tax secrets to hide.

In addition, the Irish Parliament has been recalled for a full debate next Wednesday (7 September).

Education minister Katherine Zappone (independent) said Ireland should enter a “robust era of tax justice”, while the main opposition party, the nationalist Sinn Fein, is calling for full disclosure of the facts and figures in the Apple case.

Whatever the debate may bring, the government has promised foreign investors that its low 12.5-percent corporate tax rate, as well as other incentives, such as tax credits for R&D operations, remained “sacrosanct”.

The transport minister, Shane Ross (independent), also said corporations should be “seen to be paying their fair share”, but added that multinationals are “vital” for creating jobs.

Both the Irish government and Apple have denied the commission’s findings, and were quick to attack competition commissioner Margrethe Vestager when she issued her decision earlier this week.

Finance minister Michael Noonan described the retrospective nature of the commission’s investigation as “bizarre and outrageous.”

Not first time

It is not the first time that Ireland has been forced to deny that it was a tax haven.

The senior Irish cabinet source, who asked to remain anonymous, said that severe tax avoidance on the Apple model had been allowed “in the past”, but it had ended when Ireland abolished a loophole concerning “stateless companies”.

Dan O’Brien, chief economist at the Institute of International and European Affairs, a think tank in Dublin, said Ireland is not a tax haven because tax havens typically involve illegal tax evasion.

“Nobody has ever accused Ireland of tax evasion”, he told this website, adding that the question that the government will have to ask itself is: “When does avoidance become excessively aggressive?”.

The Irish government is also accusing the EU commission of using state aid rules to interfere in Irish tax policy.

Each EU member state has full competency over tax affairs, but Ireland has come under severe pressure in recent years by Europe to alter its corporate tax regime.

Pressure on tax

In 2011, shortly after it received an €85 billion bailout from the EU and the International Monetary Fund, France said that if Ireland wanted relief on the high interest rate due, it would have to increase its corporate tax rates.

Ireland refused to budge, because the low corporate rate is a cornerstone of its economic model.

For O’Brien, the commission’s current attack is also political and is linked to Ireland’s diminutive status.

He noted that Brussels gave France and Spain preferential treatment on fiscal rules, but picked a fight with Ireland because it believes that it would win.

The commission is becoming “more politicised”, and "when you’re picking fights, you pick ones that you can win,” said O’Brien.

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