Thursday

21st Jun 2018

Apple to pay back Ireland €13bn in lost tax

  • Apple's HQ in Cork, Ireland, employs more than 5,000 people (Photo: Joseph Teegardin)

US tech giant Apple has provisionally agreed to pay back Ireland €13 billion in what the EU called illegal state aid.

The money will begin to flow into an escrow account in January, where it will remain blocked pending a definitive ruling on the case by the EU Court of Justice in Luxembourg.

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  • Donohoe: 'Everybody ... should pay their fair share of tax' (Photo: consilium.europa.eu)

An escrow account is one held by a third party while the two main participants complete their transaction.

"We expect the money will begin to be transmitted into the account from Apple across the first quarter of next year," Irish finance minister Paschal Donohoe told press in Brussels on Monday (4 December).

"Across the period in which we are defending the ruling, we will be complying with our obligations in terms of collecting the money from Apple," he said.

The €13 billion covers the period 2003 to 2014 when Apple, which has its European, Middle East, and Africa HQ in Cork, in southern Ireland, paid Ireland 0.005 percent corporate tax instead of the country's normal 12.5 percent rate in a sweetheart deal called a "tax ruling".

The EU ordered Apple to repay the money to Ireland in August 2016.

It then sought an EU court injunction to go after the funds after Ireland refused to comply, with both Ireland and Apple challenging the court ruling in ongoing proceedings.

Donohoe, who was in the EU capital on Monday to meet fellow finance ministers and to update EU anti-trust commissioner Margrethe Vestager on the Apple case, said it was "difficult" because of the "scale of the fund and the uniqueness of this issue".

But he said the Irish government had made "significant progress" in agreeing the "principles and operation of the escrow fund".

A commission spokesman said the same day: "We hope that we can work constructively with the Irish authorities to make sure that recovery is completed as soon as possible".

The US firm also changed its tune on Monday.

Apple CEO Tim Cook had called Vestager's probe "total political crap" back in 2015.

The firm said in a statement on Monday it was "confident" that the EU court would rule in its favour.

"The commission's case against Ireland has never been about how much Apple pays in taxes, it's about which government gets the money," it said.

"The United States government and the Irish government both agree that we've paid our taxes according to the law," it said.

But it added that it was working "diligently and expeditiously with Ireland on the [escrow] process".

Wider crackdown

Apple is part of a wider EU crackdown on tax avoidance that began after the so-called 'Luxleaks' revelations in 2014 on secret tax rulings by member states.

The €13 billion amounts to almost 6 percent of Apple's cash reserves as of August.

The US firm shifted its EU profits to a shell firm in Jersey, a UK protectorate, to keep on avoiding tax after Ireland closed its loophole, the so-called 'Paradise Papers' leak revealed in November.

The commission has already clawed back money in Belgium and the Netherlands in actions involving corporate giants Fiat, McDonalds, and Starbucks, and recently launched an investigation into UK tax practices.

It has also proposed new laws to increase tax transparency in Europe, as well as financial sanctions against jurisdictions that were to be blacklisted as tax havens by EU finance ministers in a new list due out on Tuesday.

Irish reputation

That blacklist should include Ireland, NGOs have said, but EU states are to be automatically excluded from the register.

Ireland's Donohoe hit back on Monday by saying that the OECD, the Paris-based club of wealthy nations, had placed Ireland in its "highest category" on tax transparency along with just 21 other countries worldwide.

He also said Irish authorities had recovered €1 billion in recent times from "offshore operations [designed] to avoid tax liabilities".

"Ireland has and will play its role in what's needed to deal with the issue of aggressive tax avoidance", Donohoe said.

"Everybody, whether individuals or companies should pay their fair share", he said.

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Swedish founded furniture retailer Ikea has reportedly been targeted by the European Commission, which is set to launch an investigation into how tax schemes in the Netherlands allegedly enabled it to avoid paying into public coffers.

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