Brian Hayes MEP

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Apple decision is yet another case of the EU meddling in our tax affairs

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Apple decision is yet another case of the EU meddling in our tax affairs

Opinion piece by Brian Hayes MEP, published in the Irish Independent on Wednesday 31st August 2016

As the Competition Commissioner Margrethe Vestager presented the grim news of Ireland’s alleged wrongdoing in the case of Apple yesterday, there was no denying that the European Commission saw this as a major PR win in the battle against multinational tax dodging.

Apple-Logo-black

Ms Vestager, who came into office in the Commission in 2014, has been widely revered as a no-nonsense enforcer who wouldn’t back down against governments and big business. Her appointment was seen as a departure from the compromise-based approach of the previous competition Commissioner Joaquin Almunia, who himself left much unfinished work. More recently though, she has been seen to succumb to the bureaucratic ways of Brussels with probes into Google and Gazprom running into difficulties.

Make no mistake about it – the Apple case is a big-ticket decision. A lot of reputations are riding on this. A showdown against the world’s biggest company was always going to garner huge attention.

With such a determined push against Apple, the odds were always stacked against Ireland. But I think we have to see this for what it is – a highly politically motivated targeting of a small Member State along with a clear bias against US multinationals. We were bound to get caught up in the crossfire.

The Commission claims that the Irish Revenue gave Apple a sweetheart deal. Our tax system is statute-based, meaning that the Revenue Commissioners do not operate on the basis of giving special deals to companies. Companies can seek advice, or an advanced opinion as they are called, to get an assessment of the tax liability that applies. This is exactly what Apple did both in 1991 and 2007 – the periods under investigation.

The crux of the whole legal dispute is about whether taxes should have been paid in Ireland or the US. The US Treasury, the Department of Finance and the Revenue Commissioners all agree that the profits under investigation were not due to Irish Revenue.

Apple iPhones are designing and developing in the US, not in Ireland.

Revenue can only tax the profits generated by the activities of an Irish branch of a company for economic activity in Ireland.

It is inconceivable that Revenue should be appealing to an Apple branch in Silicon Valley to cough up taxes to the Irish state. Is this what the Commission expects from us?

Regardless of these legal wranglings, this is yet another clear case of the Commission meddling in the tax affairs of a small Member State. We know that other players in the EU have our corporate tax in their sights.

Why do we never see such high-profile cases taken against companies in France, for example? A World Bank report recently showed that France’s effective corporate tax rate is 8.8pc while its headline rate is 34pc. Yet we have never seen a proper Commission investigation into France’s various loopholes and tax breaks. In the same World Bank report, Ireland’s effective corporate tax rate was found to be 11.9pc, very close to its headline rate of 12.5pc.

The Government must defend the strong reputation of our taxation system and how it is applied by the Revenue Commissioners.

This has to be done through an appeal to the European Court of Justice.

The scale of the judgment demands that the issue be adjudicated in the courts. To do otherwise would effectively be saying that the Commission’s allegations are correct and that it can encroach on Member States’ sovereign tax rights.

This decision comes at a time of huge political uncertainty, following a disastrous result in the UK referendum on EU membership, where sovereignty was the key issue at stake.

It’s the Dáil that decides tax, not the EU institutions.

In my view, the European Commission has overstepped its role and its mandate.

There are serious allegations against the Commission’s approach in this case, many of which were so blatantly exposed in the US Treasury’s recent White Paper on the Commission’s State Aid investigations.

It is clear that the Commission is using a more expansive definition of what constitutes State Aid in order to take decisions on our corporate tax regime.

Under the treaties, we have complete control of our corporate tax regime. There are also serious allegations that the Commission has departed from prior case law, which sets out how State Aid should be applied.

These are all issues that must be tested in a European Court.

The Commission has made mistakes on State Aid in the past. In 2011, the Commission ruled against Spain for a tax regime which was alleged to have favoured a certain few companies, including Santander.

In 2014 the Court of Justice overturned the Commission’s decision and ultimately the Spanish government did not have to recover the so-called ‘illegal State Aid’.

Aggressive tax planning has to be tackled. The best way of doing that is through the OECD and we beginning to see the effects of that coordination paying off.

From 2014 to 2015, our corporate tax take went up by 50pc. The new rules are having an effect. Pretending that we can rewrite tax treatment is a receipt for disaster for Ireland and for the EU.


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