The Apple tax appeal begins today: Ireland is saying it does not want the €13 billion the EU says the company should owe and did not pay because of Ireland's abuse of competition law.
Let's cut to the quick here: Ireland says it's case is that the tax is not due in Ireland. Michael Noonan, its finance minister, said this summer:
Look at the small print on an iPhone. It says designed in California, manufactured in China. That means any profits that accrued didn't accrue in Ireland, so I can't see why the tax liability is in Ireland.
Noonan is engaged with the MEGO principle. This principle, defined by Senator Carl Levin in the USA, requires that when surveying a tax deal a person let 'my eyes glaze over'. They see only the legal detail of the particular issue they are presented with and say that in that context they can find no issue of concern. And of course, the scheme is designed to make sure that is the case: in isolation each part may make sense: the aim is to ensure that the likes of Michael Noonan can, with closed mind and a resulting lack of consideration as to the consequences of their acceptance of the legal construct with which they are presented, say with apparently easy conscience that no tax is due.
The difficulty for Noonan, Ireland and Apple is that there is now an EU Competition Commissioner who, with eyes wide open, looks at the deal Apple did and says that Ireland knowingly and wittingly assisted that outcome by allowing the existence of companies not taxable anywhere for which only they could be responsible in the scheme as a whole. The result is that the EU says it is inevitable that tax should be due in Ireland. Ireland's claim, they say, is not true because it let is eyes glaze over, knowing the consequences.
This is the conflict to be played out in the European courts: may a country turn a blind eye to tax abuse or not? For the sake of tax justice there is only decision the court can make.
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Its a rather strange case but I’m saddened my home country facilitates tax avoidance. As the Irish economy is only around 1/10 the size of the UK €13 billion is a large sum; over £100 billion in UK terms. Maybe the Irish government is afraid that the post Brexit UK will become a major tax haven on its doorstep and feels it has to compete?
The key issue here is the ability of MNCs like Apple to apply US tax law to avoid repatriating profits earned overseas that normally would be expected to be repatriated. With some justification the Irish authorities could argue, and do argue, that the amunt of tax paid by Apple in Ireland is appropriately levied and collected in relation to its actual economic activities in Ireland. Furthermore, they could and do argue that because the US tax authorities previously have appeared relaxed about the offshoring of profits that might normally be repatriated and about Irish registered entities facilitating this off-shoring there is no basis for levying taxation retroactively. Why should Ireland levy taxation on profits that had been generated in the US and other jurisidctions when the authorities in these jurisdictions didn’t seek to levy appropriate taxation?
Apple’s off-shoring via Ireland using the previous machinations has now ceased.
I’m not for one second defending the actions of the Irish authorities, but it appears they’ve collected the tax from Apple that they were due. Let the US and other national authorities go after Apple for a share of the fabled €13 billion. And to be fair to DG COMP they have indicated that the inevitable legal proceedings should generate opportunities for this.
The issue is whether the scheme let tax not be paid where it was due elsewhere
Apple is not just in Ireland and the US even though it might like to claim that
The arrangement deliberately and knowingly undermined tax elsewhere
And that is the EU abuse. I would rate the chance of this appeal succeeding as exceptionally low
The “issue” is actually whether or not Apple received state aid – that is, was it granted an advantage from resources of the Irish state, on a selective basis, in a way that could distort competition within the EU?
We know what the Commission thinks, and we know what Apple and the Irish government think. Given the disagreement between the parties, and the sums at stake, it is hardly a surprise that the matter is going to court.
Hold on, over here: http://www.taxresearch.org.uk/Blog/2016/11/24/the-uk-is-proposing-to-use-the-worst-form-of-unitary-taxation/ you’re saying that UK companies should not be taxed overseas on sales they make overseas, supporting it’s description of being “bonkers”, but in this article you are saying an overseas company *should* be taxed in the UK on sales it makes in the UK.
I am saying that under existing systems there is meant to be commercial substance to the arrangements and that appears absent here
That is different from saying what the system should be
Please don’t mix the two