How the European Commission calculated 13bn tax bill
Comment of the Day

August 30 2016

Commentary by Eoin Treacy

How the European Commission calculated 13bn tax bill

This article by Suzanne Lynch for the Irish Times may be of interest to subscribers. Here is a section:

Ms Vestager said on Tuesday that the commission had concluded that the splitting of Apple’s profits between the two parts of the AOE and ASI companies “did not have any factual or economic justification.”

?In short, the commission has concluded that Ireland gave illegal state aid to Apple, in breach of EU law.

It will now fall to lawyers for the accused to contest this.

The refrain from Government circles has long been that the EU may not have liked the tax structures that were in place at the time when the Apple deal was struck but that does not mean that they were illegal.

It may be some years before a definitive answer on this question will be reached.

Eoin Treacy's view

The European Commission has raised important issues for Ireland not least because without its sovereign ability to set taxation there is very little reason for such a large number of Silicon Valley’s best and brightest companies to choose the little green island in the North Atlantic as their favoured destination for European headquarters. 

The argument about whether Ireland provided illegal state aid to Apple hides the broader question of the EU’s desire to develop a harmonised corporate tax rate. I find myself considering that surely it is in a company’s power to decide where it sites its regional headquarters. When an iPhone is sold in France or Germany the local exchequer picks up a hefty sales tax in the form of VAT if Apple does not have a corporate headquarters in one of those countries why should it pay corporate taxes.  

The USA is obviously protesting the decision but has its own record of adventurism in the fines and taxation arena when it targeted companies like BP, HSBC and Credit Suisse. Volkswagen may have a more difficult time in the USA in future as the full repercussions of its emissions fixing scandal unfold and are viewed through the lens of how the EU treats US companies. . 

For Ireland the whole saga raises deep questions about the quid pro quo of EU membership. The country is still living within the constraints of fiscal cohesion, is now a net contributor to the EU, its fisheries have been denuded and the bloc is now coming after its crown jewels. Public support for the EU has so far been robust but it is not beyond the bounds of possibility that these kinds of questions will cause a deeper questioning of where the country’s best interests lie. 


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