European Commission takes Ireland to court for failing to collect taxes from Apple
Confirming an earlier report, the European Commission on Wednesday said it will bring Ireland to the European Court of Justice for failing to collect at least $15 billion in back taxes from Apple, which were originally due Jan. 3.
"More than one year after the Commission adopted this decision, Ireland has still not recovered the money," Competition Commissioner Margrethe Vestager said in a statement heard by Reuters. "We of course understand that recovery in certain cases may be more complex than in others, and we are always ready to assist. But member states need to make sufficient progress to restore competition."
She noted that in similar tax cases such as Fiat in Luxembourg and Starbucks in the Netherlands, money was recovered before appeals were exhausted -- in those circumstances though, far less money was involved.
Vestager refused to comment on potential penalties, but the Irish government will likely face a fine if it loses at court.
Ireland's finance ministry on Wednesday said that it has been contact with Apple and the Commission for over a year, and is close to setting up an escrow account which would hold Apple's money pending the outcome of a government appeal. Apple is also appealing.
"It is extremely regrettable that the Commission has taken this action, especially in relation to a case with such a large scale recovery amount," the finance ministry said in a statement.
In August 2016, the Commission ruled that Ireland had extended illegal state aid to Apple, offering preferential terms that allowed the iPhone maker to pay miniscule amounts -- as little as 0.005 percent in 2014 -- despite funneling billions in international revenue through the country. E.U. law stipulates that benefits available to one company must be offered to all.
Ireland has maintained that it offered the same terms to other businesses, while Apple has repeatedly stated that it follows the law in every country it operates in. The laws themselves are in question, however.
"More than one year after the Commission adopted this decision, Ireland has still not recovered the money," Competition Commissioner Margrethe Vestager said in a statement heard by Reuters. "We of course understand that recovery in certain cases may be more complex than in others, and we are always ready to assist. But member states need to make sufficient progress to restore competition."
She noted that in similar tax cases such as Fiat in Luxembourg and Starbucks in the Netherlands, money was recovered before appeals were exhausted -- in those circumstances though, far less money was involved.
Vestager refused to comment on potential penalties, but the Irish government will likely face a fine if it loses at court.
Ireland's finance ministry on Wednesday said that it has been contact with Apple and the Commission for over a year, and is close to setting up an escrow account which would hold Apple's money pending the outcome of a government appeal. Apple is also appealing.
"It is extremely regrettable that the Commission has taken this action, especially in relation to a case with such a large scale recovery amount," the finance ministry said in a statement.
In August 2016, the Commission ruled that Ireland had extended illegal state aid to Apple, offering preferential terms that allowed the iPhone maker to pay miniscule amounts -- as little as 0.005 percent in 2014 -- despite funneling billions in international revenue through the country. E.U. law stipulates that benefits available to one company must be offered to all.
Ireland has maintained that it offered the same terms to other businesses, while Apple has repeatedly stated that it follows the law in every country it operates in. The laws themselves are in question, however.
Comments
Ireland may well consider an Irexit. But they will surely want to see how Brexit turns out first. And they would have to consider what it means to all the companies that set up there for EU access and low taxes.
If Ireland’s tax laws do not jive with EU law then they should be changed to align with EU law. Then going forward Apple would pay the higher tax rate. But attempting to collect taxes retroactively is terrible policy and is legally and ethically dodgy. Just sends all the wrong signals about the EU being a good place to do business.
Regarding taxes and competition: EU has legislation in pipeline which introduces “virtual residency” for tax purposes. This will be quite groundbraking and from EU perspective will level playing field for companies regardless on their country of incorporation.
It is absolutely unthinkable that Ireland will leave the EU. The European HQ of international companies like Apple, Microsoft, Dell, ... is the chicken with the golden eggs. Leaving the EU, would make these companies to move to another European member state, which would have a devastating impact on the economy of Ireland. Currently a lot of international companies have announced to move part of their UK offices to mainland Europe in view of the Brexit becoming a fact in 2019. The shaky ground is not in Europe, but in the UK
Note that that calculation only figures net payments into the EU vs. direct payments from the EU. It does NOT account for the hundreds of billions gained by free trade within the common market, by having common customs control and all the other benefits of living within the EU — all of which Britain is losing, as things are going now.
Leveling the playing field on EU wide taxes would be a crushing blow to free market principles and competition among member states in the sense of who’s got the better economic structure and tax policy. This implementation will mostly benefit the higher tax countries and it will leave countries like Ireland at a disadvantage in attracting investment.