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A major ruling is expected tomorrow in the €13 billion Apple tax row - but don't expect the saga to end there

Whoever loses is likely to appeal that decision to a higher EU court.

TOMORROW MORNING, THE General Court of the European Union will deliver judgment in Apple and Ireland’s appeal against the European Commission’s €13 billion tax ruling.

Although the matter could eventually have serious implications for Ireland’s corporate tax regime, experts say that the ruling is just Round One of what could be a lengthy legal wrangle.

Whoever loses  — the tech giant and the Irish government on one side, or the European Commission on the other — is expected to appeal the decision to Europe’s highest court, the European Court of Justice, which could take up to two and a half years to deliver a final ruling.

That itself could have implications for Commission plans to crack down on low-tax member states with alleged sweetheart tax arrangements for multinationals. 

Domestically, politicians have been piling pressure on the government to forgo another appeal if it loses.

Highlighting the €8 million that the case has cost the State in legal fees, Solidarity People Before Profit TD Richard Boyd Barrett said today that not taking the Apple tax money would be “a form of economic treason” in the context of the Covid-19-linked recession.

Even a member of the government, the Green Party’s finance spokesperson Neasa Hourigan, has questioned the need for a second appeal.

Regardless, the consensus is it that the government will file an appeal in the event of an adverse finding.

Aggressive tax planning

The European Commission, the executive branch of the European Union, has long been keen to crack down on “aggressive tax planning” by multinationals and the governments that facilitate it.

Ronan McCrea, professor of constitutional and European law at University College London explains that because of its low corporate tax environment, “Ireland is a member state that is politically invested in one side of the debate about whether the EU should have more powers over member states’ taxation policies”. 

But the Commission has one major obstacle in its path.

“It’s very difficult to get any legislation on increasing EU tax powers through the EU legislature because it’s subject to unanimity and member states like Ireland will veto it.

“So, if the Commission wins today and it’s supported by the European Court of Justice down the line, the EU will be getting, indirectly, without passing any new legislation, greater control over taxation. So that could be politically important.”

A lot has to happen before then.

After tomorrow’s judgment, either side will have a little over two months to file an appeal to the European Court of Justice on a specific point of law.

McCrea explains the process:

“Normally, if it’s not seen as an urgent case, which this isn’t — urgent cases usually have to do with people being in prison or things like that — it goes to the Court of Justice,” he says.

“There are then two stages in the Court of Justice ruling. There will be an opinion of the Advocate General, who’s a member of the court but not a voting judge. That will be an opinion about how the court should rule, and then the court will issue a decision later, sometimes months later.

“In general, the whole procedure takes around 18 months. Sometimes longer.”

So will today’s ruling have any impact on the taxation debate at all?

McCrea thinks so.

He says that if, for example, the Commission wins today, it could increase the pressure on countries like Ireland to make changes to their tax policies even before the Court of Justice has its final say on the appeal.

McCrea explains, “Even if we’re waiting a year and a half but we know that the initial decision was in the favour of the Commission, that probably would change the political complexion a bit.

“So, if the Irish government think it’s more likely that the EU will get these powers [after a Court of Justice ruling], then maybe they’re more willing to come to a compromise solution rather than risk losing fully on this issue.”

On the other hand, McCrea says that an appeal could slow any Commission plans to introduce new legislation to harmonise tax across the bloc.

“Passing legislation in the EU takes a long time,” he says.

“First you have to consult the member states then the legislation has to go to the Council of Ministers, and the European Parliament. By the time it comes into force, the Court of Justice might not have ruled yet and then it might rule that the legislation can’t be passed.

“So they might want to wait for a definitive ruling.” 

Illegal benefits

Tomorrow, the General Court will determine whether two tax rulings delivered by the Revenue in 1991 and 2007 allowed the company to funnel profits through Irish-anchored structures without paying tax in any jurisdiction.

It will be the first legal ruling in a case that formally kicked off in 2014 when the Commission opened an investigation into the matter, which concluded in 2016.

It found that the two rulings had breached EU state aid rules designed to prevent individual companies from receiving favourable treatment from member state governments. As European Commissioner for Competition Margrethe Vestager put it at the time, “Ireland had granted illegal tax benefits to Apple”.

Ultimately, after concluding that Apple had been paying corporation tax at an effective rate of just 0.005%, the Commission ordered the US company to hand back €13 billion in unpaid tax and over €1 billion in interest payments to the Irish government. 

Shortly after the ruling, the company appealed it to the General Court of the EU. For its part, Apple roundly denied that it had ever sought special deals with any government and accused the Commission of selectively quoting “tiny figures”. 

Controversially, the Fine Gael minority government at the time, backed by Fianna Fáil, decided to join the appeal.

As McCrea explains, one of the reasons why the government was so keen to effectively hand back the money was so foreign companies “know that Ireland is fighting so they can keep the arrangements that they have.”

Multinationals that might be considering investing in Ireland “want to know that those arrangements won’t be unpicked at a later date”, he said.

Labour Party leader Brendan Howlin also supported the decision, which Sinn Féin, Independents4Change, Solidarity-People Before Profit and the Green Party opposed.

The government and Apple’s appeal was heard by the court over two days last September.  

Sources say that a one-page summary of the court’s judgment is expected at around 8:30 am tomorrow morning.

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    Mute tony murphy
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    Jul 14th 2020, 9:06 PM

    This money could bail Ireland out of the money spent on the Covid 19 crisis and set us up for recovery but our government would rather spend millions fighting it is beyond madness just like the children hospital and Irish Water. Millions wasted so annoying.

    139
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    Mute Rochelle
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    Jul 14th 2020, 9:15 PM

    @tony murphy: Loans on low interest are covering money spent on Covid 19, no bailout required.

    We all know being a tax haven is worth more to the government than taking the cash and letting the multinationals leave, unethical as it may be. Our entire economy would collapse overnight without the tech and pharmaceutical companies.

    153
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    Mute thomas patrick
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    Jul 14th 2020, 9:19 PM

    @tony murphy: its not as simple as a transfer of 13bn to a bank account.

    43
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    Mute Jane
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    Jul 14th 2020, 9:29 PM

    @tony murphy: we won’t get anywhere near €13bn. It will be shared out between lots of countries.

    36
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    Mute James Rowan
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    Jul 14th 2020, 9:29 PM

    @tony murphy: its not our money

    32
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    Mute Séadna O'Grádaigh
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    Jul 14th 2020, 9:36 PM

    @tony murphy: The money will go to many other countries and we will end up with a tiny %. There’s a reason why the EU want us to change our corporate taxes, we are cleaning up compared to European countries and that is a great thing for this country. Ireland need to fight that court case right to the end.

    54
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    Mute Fintan O'flaois
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    Jul 14th 2020, 10:06 PM

    @tony murphy: 1) the funds held by a US escrow agent, even if we withdraw our appeal to the European Count of justice, the funds will not be released from escrow until Apple also drop their appeal, 2) we generate >€10bn p.a. in FMN corporate, income, withholding and other taxes – the €13bn apple tax settlement is a flash in the pan compared with the multi annual revenue we accrue, we can’t prejudice this multi annual revenue for a one off payment.

    31
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    Mute James Gorman
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    Jul 14th 2020, 10:56 PM

    @tony murphy: you that stup!d Tony? If it were that simple. Educate yourself in the issue.

    18
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    Mute Teresa Ryan
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    Jul 15th 2020, 8:23 AM

    @tony murphy: I think you mean billions.

    1
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    Mute Teresa Ryan
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    Jul 15th 2020, 8:24 AM

    @Rochelle: Where are they going to go?

    1
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    Mute David cotter
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    Jul 14th 2020, 9:30 PM

    Wonder if any of the revenue officers who created this wonderful arrangement for Apple became shareholders

    43
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    Mute Teresa Ryan
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    Jul 15th 2020, 8:26 AM

    @David cotter: Surely the arrangement was created by the then government, not revenue? Does revenue have the power to create our tax policies instead of just implementing our tax laws.

    1
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    Mute Jack Inman
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    Jul 14th 2020, 9:38 PM

    People seem to have a hard time understanding basic economics.
    The reason not just Apple but, a bundle of corporate entities have large operations here is because of the favourable conditions including tax structures on offer.
    Without them, these companies up stocks and move.
    Having them goes against the concept of a level playing field (which as we are reminded daily through Brexit negotiations) is paramount to them….. hence why the EU are so keen to stamp it out. Rightly or wrongly.

    34
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    Mute Dave Hammond
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    Jul 14th 2020, 10:05 PM

    @Jack Inman: the reason the EU to ‘stamp it out’ is not as you claim , the reason the EU want a change is that with the emergence of digital economies major tech giants are increasingly selling and profiting in their jurisdictions and taking the monies out and paying so little tax ( 0.005 % in apple case) to them countries – so if you are France Germany etc you are not going to stand by and allow that to continue – this is the real issue – a fairer share on profits made in each country going back to country – and the amounts are so huge we cannot expect things to just stay the same – this will run and run for a good while yet – the assumption these co will up stocks and move is not so straightforward either – they need to be in EU to try sell and service into 500m market from somewhere

    20
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    Mute Nuala Mc Namara
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    Jul 14th 2020, 10:14 PM

    @Jack Inman: The new OECD rules on digital taxes are due to come in this year which will affect Ireland especially!

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    Mute Fintan O'flaois
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    Jul 14th 2020, 10:17 PM

    @Dave Hammond: To be clear, sales taxes are paid in the jurisdiction where the sale takes place and this dispute is about corporate taxes, which are normally paid upon consolidation of accounts to the parent entity – these are US entities and when the funds are eventually repatriated, in Apple’s case from the Cayman Islands, and the IRS will want their share. The US will not allow the EU to slice a portion of tax that they ultimately consider to be theirs and if the EU tries to impose a digital tax the US will retaliate. In reality the US is Ireland’s biggest ally in preserving our corporate tax policy.

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    Mute Ian Breathnach
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    Jul 14th 2020, 11:26 PM

    The tax structures are open to all companies. The OECD states our tax regime is one of the most open and transparent.

    https://www.irishfunds.ie/getting-started-in-ireland/taxation

    3
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    Mute Jack Inman
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    Jul 14th 2020, 11:27 PM

    @Dave Hammond: what you have advocated there is exactly what my point was. A level playing field where no one EU member state benefits from a distinctly competitive tax regime at the expense of another. Which is exactly what the EU wants.
    It’s fair enough but, find it incredible given the inequality in state subsidy laws that favour Germany.

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    Mute Jack Inman
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    Jul 14th 2020, 11:28 PM

    @Fintan O’flaois: exactly. That €13 billion doesn’t go to Ireland despite people seeming to think it does

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    Mute Vladimir Macro
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    Jul 14th 2020, 9:11 PM

    “Although the matter could eventually have serious implications for Ireland’s corporate tax regime”.

    Why dont other countries do what we do if it’s legal. 12.5% and the generous R&D grants.

    Collect the money, stay competitive and stop the spin for christ sake.

    25
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    Mute King B
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    Jul 14th 2020, 9:33 PM

    @Vladimir Macro: They’re paying no where near the 12.5% rate, that’s the major problem. You , me and every other Joe soap out there pay more tax on 50quid than the coporates.

    46
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    Mute Darragh Bailey
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    Jul 14th 2020, 9:50 PM

    @Vladimir Macro: they do, I’m not sure there is any country in the EU where multinationals actually pay the quoted corporate tax rate

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    Mute thomas patrick
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    Jul 14th 2020, 10:07 PM

    @King B: you me and every joe soap dont employ 1000s of people… the benefit to our economy far outweighs the 13bn

    19
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    Mute Fintan O'flaois
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    Jul 14th 2020, 10:07 PM

    @Vladimir Macro: They do, there’s several other countries in the EU with lower headline and effective corporate taxes.

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    Mute Finian Gardner
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    Jul 14th 2020, 10:11 PM

    @Vladimir Macro: lots of countries have lower effective tax rates however they can be very volatile when governments change. Ireland has offered certainty for years and certainty is valued highly when these things are being decided.

    10
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    Mute Vladimir Macro
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    Jul 15th 2020, 8:02 AM

    @Finian Gardner: if that’s the case just collect it. The cheap game is over for multinationals

    1
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    Mute Fifty Shades of Sé
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    Jul 15th 2020, 11:09 AM

    @Vladimir Macro: Other countries do and that’s the problem. It means a race to the bottom which will end in corporations paying no tax at all and having more wealth and power relative to democratically elected governments.

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    Mute Fifty Shades of Sé
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    Jul 15th 2020, 11:10 AM

    @thomas patrick: You think their 6000 employees in Cork have earned more that €13,000,000,000?

    1
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    Mute David cotter
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    Jul 14th 2020, 9:52 PM

    Well jack it’s just plain wrong that the wealthiest company’s ever pay bugger all tax…that’s basic disgusting…

    21
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    Mute Fintan O'flaois
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    Jul 14th 2020, 10:25 PM

    @David cotter: Ethically I agree; why are ordinary citizens paying 52% income tax when Apple are paying minimal taxes on billions of Euro in income? Let’s increase our corporate tax rate to 52% and watch our €10bn p.a. corporate tax revenue evaporate before our eyes. While we’re at that, we might give notice to the 100,000 well paid jobs in foreign multinational companies to look for new employment when Apple et al relocate, and we’ll need to find another few billion in income and other taxes that we’ll lose when those jobs leave our shores.

    14
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    Mute Brian Flavin
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    Jul 14th 2020, 9:23 PM

    Should apple pay €13bn pay to government for would help cover bill stuff etc covid, shouldn’t delay

    6
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    Mute Thomas Bourke
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    Jul 14th 2020, 9:38 PM

    @Brian Flavin: Apple *HAVE* paid the money to the Irish governent. The NTMA in turn has invested that money -> https://www.reuters.com/article/us-ireland-apple/ireland-invests-disputed-apple-taxes-in-low-risk-bonds-idUSKCN1TW2S4

    The issue is, if apple’s deal is found to be completely iffy, then how many others – since 1991 need to be re-opened

    Then the lawsuits start… I mean, if a government agency signed off on a deal back then, how would the investor know the government would be back after them 20 years later.. if you believe the legal fees for Apple are enormous, to quote BTO “you aint’ seen nothing yet…”

    So while the bobbleheads wave their hands in disgust (as it’s APPLE!), the down-the-road issue of lawsuits is forgotten…

    As that meme of Blade (with an unsheaved swords) behind the characters from twilight says.. this will not end well

    9
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    Mute Fintan O'flaois
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    Jul 14th 2020, 10:20 PM

    @Brian Flavin: You may believe so but it’s not legally possible until the escrow agent in New York who is holding the €13bn releases the funds, once Apple’s case with the European Court of Justice is resolved.

    3
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    Mute Paul Buckley
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    Jul 14th 2020, 10:56 PM

    Ireland should be kicked out of the EU, I dont want to be in it, and more than likely will never get a chance to vote on an Irexit.

    Yes I know all the comments will be coming in by the lickarses I want an Independent Ireland , we didn’t fight a war of Independence only to leave one Union to join another , utter betrayal to our Fenian Dead.

    7
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    Mute Ian Breathnach
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    Jul 14th 2020, 11:27 PM

    @Paul Buckley: Is that you Gemma?

    15
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    Mute Paul Buckley
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    Jul 15th 2020, 12:40 AM

    @Ian Breathnach: no it GO’D to you

    1
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    Mute Bornicks eyes.
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    Jul 14th 2020, 10:33 PM

    Don’t worry, when the final Bell has rung on this virus debacle ,there will be very few Corporation s around anywhere to pay tax…it’s simple economic s no consumer need, no products or services needed, no money changing hands no corporation s.. maybe McDonald’s and fast food may survive but the airline and tourism as we know it will change for the foreseeable future.

    3
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    Mute Teresa Ryan
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    Jul 15th 2020, 8:32 AM

    @Bornicks eyes.: No consumers for technology? Not going to happen.

    1
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    Mute Teresa Ryan
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    Jul 15th 2020, 8:31 AM

    Yet billions of state aid was required to bail out the banks. Billions of state aid will be required to bail out businesses after Covid-19. What’s the difference?

    1
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