IN the words of the old time comedian Max Miller, “Now here’s a funny thing” as the Irish government doesn’t want to uphold a ruling by the European Commission to demand that Apple pays up to €13 billion to Ireland in avoided tax due to the illegality of a deal struck between the giant electronics company and the Irish government.
This amount, which is the equivalent of a whole years cost of the Irish Health Service, has been accumulated over a period of 24 years between 1991 and 2015 and includes an amount of interest on the entire figure.
Both the Irish government and Apple have already indicated that they intend to appeal against the ruling whilst the US government has joined in saying that not only has Apple complained to it, but it is worried that if this ruling remains in place, then Apple might pay less tax within the US in the future.
According to the findings of the investigation, which has been carried out over a period of years, Apple actually paid as little of 0.05 per cent of its profits to the Irish government in 2014 but they did make a number of investments in the country and employ 6,000 staff in Cork.
There is little doubt of the conclusions as far as the EU is concerned with a clear statement from the European competition commissioner that “Member states cannot give tax benefits to selected companies, this is illegal under EU state aid rules. The commission’s investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years.”
Whilst the ruling may look like a windfall to the Irish tax payer, there is little doubt that other countries within the EU where Apple operates would expect to take a cut of this tax shortfall as they have effectively been denied taxes that they should have received.
It is clear that while cash-rich Apple does not wish to pay any more tax than it needs to, the Irish are taking a much longer term strategy as they want to see the ruling reversed so that they can continue to be seen as a low cost taxation home for international corporations.
With all of the fuss over offshore investments and tax havens for individuals, it does seem that Ireland, which desperately needs income and employment, is ‘sailing very close to the wind’ and in the view of the European Commission has crossed the fine line between what is acceptable and what is not.
Tim Cook, CEO of Apple has already warned (or is it threatened?) that in the unlikely event that the ruling stands, that it could adversely affect investment in Europe and creation of jobs but as most of those jobs are aimed at selling Apple product to Europeans and then apparently avoiding tax, this may be a bit of an empty threat!
The British deal with Google to accept a £130 million (€152 million) payment of back taxes seems like a drop in the ocean compared to this ruling and if it stands, it is debatable whether the UK will be able to claim any part of a windfall from Apple if it has already left the EU.