Ireland has been labelled one of the world’s biggest corporate ‘tax havens’ now the Government aid Apple to win fight against £11.8 billion EU tax order money for its own citizens
If Apple had lost the Irish people would have seen a windfall of 13 billion-euro. But Ireland feared the loss off jobs and the exodus of offer company’s reaping the profits of the low Irish tax threshold.
Tanaiste Leo Varadkar said that despite Ireland being the most indebted nation in the developed world, the State will try not to take the windfall.
He added: “I think that no matter what the judgment is, this case will almost certainly be appealed by one party or another to the European Court of Justice.”
The last Government, then led by Enda Kenny, decided in late 2016 to appeal the Commission’s ruling, casting it as an attack on the Republic’s sovereignty when it comes to taxation, and arguing that the State did not give favourable treatment to Apple and that it does not do tax deals.
Sinn Féin and the Green Party opposed the appeal at the time.
Had Ireland lost its case, a further appeal would have proven politically controversial at a time when the Government faces a budget deficit of as much as €30 billion this year to deal with the economic fallout from the Covid-19 crisis.
The claiming the moral high ground.
“The outcome vindicates Ireland’s adherence, not just to Irish but also European rules, when levying taxation,” said Brian Keegan, director of public policy at Chartered Accountants Ireland.
“While the amounts of money are vast and the additional tax would be welcome, particularly now as we struggle to pay for the cost of the pandemic, it would have been wrong to claim money that is not rightfully ours.”
The commission set out its main claim in court hearings in Luxembourg last September, alleging that Revenue gave the tech giant an unfair advantage in two “rulings” in 1991 and 2007, which allowed the iPhone and iPad maker to channel most of its European sales through “head office” divisions of two group subsidiaries in Cork, which were non-resident for tax purposes.
Ireland is the world’s biggest corporate ‘tax haven’, say academics
Study claims State shelters more multinational profits than the entire Caribbean
Reports have claimed Ireland is the biggest “tax haven” in the world used by multinationals to shelter profits, according to a new study by economists from the United States and Denmark.
The research from academics at the University California, Berkeley and the University of Copenhagen estimates that foreign multinationals shifted $106 billion (€90 billion) of corporate profits to Ireland in 2015.
This was more than all of the islands of the Caribbean combined ($97 billion/€83 billion), and well ahead of Singapore ($70 billion/€60 billion), Switzerland ($58 billion/€49 billion) and the Netherlands ($57 billion/€48 billion), according to the researchers.
“By our estimates, Ireland is the number one shifting destination”, the paper states.
The Department of Finance rejected this as “overly simplistic” much of the findings made in relation to the Republic in the paper – The Missing Profits of Nations – authored by economists Gabriel Zucman, Thomas Torslov and Ludvig Wier. The department also rejected the notion that the Republic is a tax haven.
The research paper estimates that $1.7 trillion (€1.45 trillion) of foreign profits were made by multinationals, primarily from the US, in 2015 and that almost 40 per cent of this total was shifted to tax havens.
On Wednesday, a European Union court sided with the iPhone maker and the Irish government, saying the European Commission failed to show the nation’s tax arrangements amounted to state aid. In the process, it struck down a demand that Apple must pay a record 13 billion-euro ($14.9 billion) tax bill, surprising Dublin officials, who were braced for a loss.
Fighting alongside Apple, puzzled voters who couldn’t fathom why the country wouldn’t accept a windfall from one of the globe’s richest companies.
The government elected to fight the 2016 decision alongside Apple, a move that puzzled voters who couldn’t fathom why the country wouldn’t accept a windfall from one of the globe’s richest companies. The counter argument was Ireland had done nothing wrong, and caving in risked adding to the perception that the country played fast and loose on tax and could ultimately cost jobs.
In its order four years ago, the European Commission said Apple benefited from illegal state aid via two Irish tax rulings that artificially reduced its tax burden for over two decades – to as low as 0.005% in 2014.
Four years ago, then Finance Minister Michael Noonan called the Commission’s findings an attack on the nation’s 12.5% corporate tax rate, the cornerstone of its economic policy, even though the case didn’t center on the actual tax rate. U.S. firms, like Apple, directly and indirectly account for about 20% of Irish jobs.
Europe’s second-highest court rejected the EU order for Apple to pay 13 billion euros (11.8 billion pounds) in Irish back taxes, dealing a blow to the bloc’s attempts to crack down on sweetheart tax deals.
“The General Court annuls the contested decision because the Commission did not succeed in showing to the requisite legal standard that there was an advantage for the purposes of Article 107(1) TFEU1,” judges said, referring to EU competition rules.
The defeat for European Competition Commissioner Margrethe Vestager could weaken or delay pending cases against Ikea’s and Nike’s deals with the Netherlands, as well as Huhtamaki’s agreement with Luxembourg.
Vestager, who has made the tax crackdown a centrepiece of her time in office, saw the same court last year overturn her demand for Starbucks to pay up to 30 million euros in Dutch back taxes. In another case, the court also threw out her ruling against a Belgian tax scheme for 39 multinationals.
While 14 billion euros – including interest – would have gone a long way to plugging the coronavirus-shaped hole in Ireland’s finances, Dublin appealed against the Commission’s order alongside Apple because it wanted to protect a low tax regime that has attracted 250,000 multinational employees.
However, the government is likely to face strong criticism from opposition parties for not taking the cash, which could cover at least half of a budget deficit forecast to balloon to as much as 10% of GDP this year.
In 2013 a London flashmob targeted Apple’s London store in protest at the company’s tax avoidance policies
Apple use three subsidiaries in Ireland to help massively reduce their exposure to tax, letting Apple Sales International pay just $10m in tax on a sales income of $74bn in 2011.
Multinationals owe responsibility to a wider group than their shareholders
Paul Sweeney – Irish Times Brussels has been accused of “bending the rules” in its pursuit of Apple for €13 billion in taxes it says should have been paid in Ireland. But in truth, it is the multinationals and their corporate lawyers and accountants who have twisted the rules on taxation almost out of existence.
The tax system had been “captured” by the tax avoidance industry. Multinationals were paying less and less tax and states were reduced to tax wars against each other in failing efforts to attract them.
The public needed a champion to restore some order on the chaos and it got it in Margrethe Vestager, the European commissioner for competition. Under her the directorate general for competition did what the directorate general for taxation and directorate general for economic and financial affairs were unwilling or unable to do.
I was a dissenting member of the government advisory group that recommended the low 12.5 per cent rate of corporation tax in the early 1990s. I dissented because I believed that the rate should only be reduced to 20 per cent from the 35 per cent nominal rate then prevailing. I believed if it was only 12.5 per cent after legitimate deductions, companies might only pay an effective rate of 6 or 7 per cent.
I was so naive. Today some companies pay nothing and too many pay very little. Apple paid a mere 0.005per cent on its European profits in 2014.
It is too easy for multinationals to pay what they like in taxes, aided by globalisation, technology, multitudes of subsidiary companies in different jurisdictions and none, armies of tax-avoiding lawyers and accountants and by regulatory capture,
In a recent article on Apple’s dispute with the European Commission, Liza Lovdhal-Gormsen (the director of the Competition Law Forum) draws on the quote by Judge Wendle Holmes: “I like to pay taxes. With them, I buy civilisation.”
Lovdhal-Gormsen argues that certainty of law is central to this contract, but if the world’s biggest and most profitable company is reluctant to pay taxes and aggressively uses an array of subsidiaries to avoid tax, what hope is there for civilisation?