The European Commission (EC) is sticking to its guns regarding its state aid investigation into the Corporation Tax arrangements of Apple in the Republic of Ireland.
As everybody knows at this stage, Ireland has been ordered to recover up to €13 billion of state aid from Apple relating to a ten year review period. It is estimated that when interest is applied to this sum, the final amount due by Apple to the Irish Exchequer will be in the region of €19 billion.
Both Apple and the Irish Government have confirmed that they strongly disagree with this order and both parties plan to lodge separate appeals to the European Courts in objection to the order.
The Government has also confirmed that in its view, and according to Irish tax legislation, Apple have paid the appropriate amount of Corporation Tax. It has also confirms that no state aid was provided.
The EC has provided very limited information supporting its decision on this matter which is resulting in serious questions in relation to the validity and calculation of the tax deemed to be due to the Irish State. It is likely to be several months before the detailed reasoning supporting the decision is published by the EC.
What does this mean for Ireland and its relationship with the EU?
The Irish Corporate Tax rate, together with other factors is critical in terms of our attractiveness as an economy for Foreign Direct Investment (FDI). In theory each EU Member State is free to set their own individual tax rates for each category of tax arising in each country. However, for some years now the Irish Government has come under considerable attack from other EU Member States, but particularly France, to increase its headline Corporate Tax Rate above the existing 12½%. The Irish Government has been forced to strongly defend Ireland’s corporate tax rate against outside criticism from Europe and is resolute in its commitment in this regard.
If the appeal is lost and Ireland ultimately ends up receiving these funds as directed by the EC then in effect the EU will have taken steps which enable them to interfere in and have the potential to exert influence over tax law. If this were to transpire foreign multinationals may change their perspective of Irish tax laws and no longer regard Ireland as a suitable location for FDI purposes. This could have potentialy disastrous economic consequences for the Irish economy in the future.
We believe the Irish Government are absolutely right in fighting this decision by the EC and proceeding with an appeal to the European Courts in order to defend Ireland’s position in this regard. However, any appeal that takes place will extend the matter for many years before a ruling is received from the European Courts.