The government is set to appeal.
As we mentioned yesterday, the European Comission was expected to come to a ruling regarding Apple’s tax arrangements in Ireland. After deliberations, the European Commission has concluded that Ireland granted undue tax benefits of up to €13 billion to Apple.
#BREAKING Ireland preparing to appeal 13bn euro Apple ruling: official
— AFP News Agency (@AFP) August 30, 2016
Here’s the most pertinent details from their document:
The corporate tax rate
“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. In fact, this selective treatment allowed Apple to pay an effective corporate tax rate of 1 per cent on its European profits in 2003 down to 0.005 per cent in 2014.”
It continues: “Apple only paid an effective corporate tax rate that declined from 1% in 2003 to 0.005% in 2014 on the profits of Apple Sales International”.
How the laws were broken
“The rulings endorsed a way to establish the taxable profits for two Irish incorporated companies of the Apple group (Apple Sales International and Apple Operations Europe), which did not correspond to economic reality: almost all sales profits recorded by the two companies were internally attributed to a “head office”. The Commission’s assessment showed that these “head offices” existed only on paper and could not have generated such profits. These profits allocated to the “head offices” were not subject to tax in any country under specific provisions of the Irish tax law, which are no longer in force”.
Benefits from the larger European market
“In fact, the tax treatment in Ireland enabled Apple to avoid taxation on almost all profits generated by sales of Apple products in the entire EU Single Market. This is due to Apple’s decision to record all sales in Ireland rather than in the countries where the products were sold”.
Why EU intervention was required
“The role of EU state aid control is to ensure Member States do not give selected companies a better tax treatment than others, via tax rulings or otherwise. More specifically, profits must be allocated between companies in a corporate group, and between different parts of the same company, in a way that reflects economic reality. This means that the allocation should be in line with arrangements that take place under commercial conditions between independent businesses (so-called “arm’s length principle”).
As an image.
More details can be found here.
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