Win or lose, Apple tax ruling will be bad news for Ireland

Heads we lose and tails we, kind of, lose too. Though of course the €14 billion or so would be nice. A decision on whether Ireland illegally favoured Apple in its tax arrangements here, as was found by the European Commission, is due to be made by the general court of the European Union next Wednesday. Whatever the outcome, this will put Ireland right back in the headlines at a time when international corporate tax is already a very hot issue. This will, to use the well-worn phrase, be weaponised and Ireland will be the target.

The court is deciding on an appeal by Ireland and by Apple against the commission’s 2016 decision, which ruled that the company owed more than €13 billion in back taxes – since grown a bit in an escrow account. As of now, as Father Ted might say, the money is just resting in Ireland’s account as the company had to pay it over, but it is frozen pending the judgment. It will almost certainly stay there after next Wednesday, as whichever side loses is likely to appeal to the European Court of Justice, which would take another couple of years.

This wave of publicity about the Apple case will resurface at the most sensitive of times

From a layperson’s point of view, two things seem clear. The first is that Apple, like a lot of big US companies, organised itself to minimise the tax bill on profits earned outside the US and two Irish subsidiaries were at the heart of this. Apple insists that it has always stayed within the tax laws – what the commission found was that a deal was done between the company and Ireland which gave it an unfair advantage in its tax arrangements over many years. In other words, one not available to other companies. It was, they argued, a breach of competition law.

The second point, even if you conclude that the tax is owed, is that it is a big stretch to suggest that it is all owed to Ireland. The commission conceded as much by saying at the time of the decision that other EU countries where Apple did business might want to make a claim that some of the cash was owed to them. This seemed a weak point of their case. But we need to be conscious that this decision will turn on points of tax law in relation to transfer pricing, where there was no Irish legislation at the time and on interpretations of communications between Apple and the Irish Revenue, so the outcome remains uncertain.

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