‘Europe trying to rewrite Irish tax rules’

The European Commission has been accused of trying to rewrite Irish tax rules and of wrongly interpreting laws in a strongly worded defence by the Government on whether Apple received €13bn in state aid.

The rebuke, published last night by the Government, was released ahead of the expected publication today from Brussels of its ruling on why it claims the tech-giant owes Ireland €13bn in back-tax. Brussels argues Ireland did not collect enough tax due from Apple over a ten-year period and that the company’s tax burden was reduced in what was an alleged breach of EU state aid rules.

The damning ruling against Ireland, originally made in August, threw the Government into disarray and it was forced to quickly reject the decision and defend its decision to appeal the ruling.

Government sources say they expect that ruling, a 150-page document, to be published today. Finance Minister Michael Noonan’s department last night released its defence, in anticipation of the EU release. This strongly refutes the claims that Ireland did a special deal with Apple. “Ireland did not give favourable tax treatment to Apple — the full amount of tax was paid in this case and no state aid was provided. Ireland does not do deals with taxpayers,” the department said.

Its document outlined eight reasons why it says the EU ruling was wrong. These arguments include:

  • The commission misunderstood relevant facts and Irish law regarding two decisions made by Revenue in 1991 and 2007 on taxation. Its decision mischaracterises the activities of the Irish branches of Apple. Profits were wrongly attributed to these branches;
  • The commission has misapplied state aid law. Its assertion Apple was granted an “advantage” was incorrect. The commission attempts to rewrite Irish corporation tax rules and its claims are inconsistent with state sovereignty;
  • The commission wrongly applied the ‘arm’s length principle’ regarding Apple’s transfer pricing arrangements in Ireland;
  • The alternative line of reasoning by the commission misunderstands Irish law and no such discretion was given to Revenue in relation to taxation decisions;
  • The commission failed to follow required procedures and never clearly explained its state aid theory and the ruling contains findings which Ireland never had a chance to comment on;
  • The commission infringed the principles of legal certainty and legitimate expectations by invoking alleged rules of EU law never previously identified;
  • The commission exceeded its powers and interfered with national tax sovereignty. It has no competence to substitute its view of the geographic scope and extent of a state’s tax jurisdiction;
  • The commission has manifestly breached its duty to provide a clear and unequivocal statement of reasons for its decision

The defence reflects the Government’s decision to appeal and fight the EU’s Apple ruling. While the original ruling, set to be published as early as today, was given to the Government back in August, the document was never made public at the time and was only shared with Apple.

Its release is likely to throw the spotlight back onto Ireland’s tax arrangements with multinationals as well as how Apple’s relationship with Ireland will continue.

Mr Kenny met Apple CEO Tim Cook in the US earlier this month. The two discussed the EU case as well as the lodgement of some of the disputed €13bn into a holding account. Mr Kenny said the two men had then discussed the expansion of operations in Cork and that he had no concerns about Apple’s future in Ireland.

The appeal by the Government is expected to take a number of years.

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