Ireland accuses Brussels of exceeding its powers in Apple tax dispute

The Department of Finance has issued a list of grounds under which it has lodged an application with the General Court of the European Union to annul the Apple tax decision.

In September, the European Commission ruled that Ireland should recoup €13bn in back taxes from the tech giant.

A Department of Finance submission said: "The Commission has exceeded its powers and interfered with national tax sovereignty.

"The Commission has no competence, under State aid rules, unilaterally to substitute its own view of the geographic scope and extent of the member state's tax jurisdiction for those of the member state itself.

"The purpose of the State aid rules is to tackle State interventions which confer a selective advantage. The State aid rules by their nature cannot remedy mismatches between tax systems on a global level."

The Commission's inquiry found that Ireland's treatment of Apple allowed the global brand to avoid taxation on almost all profits generated by sales in the entire European single market.

It said this was because Apple recorded all its sales in Ireland rather than in the countries where the products were sold. Ireland argues the important decisions within the Irish branch offices were made in the US so profits deriving from those decisions could not be attributed to Ireland.

Apple has had a base in Ireland since 1980 and employs 6,000 people.

Ireland has decided to appeal against the order that the iPhone maker pay back taxes. The country has structured its economy around attracting multinationals with its low corporate tax rate but left-wing critics have argued accepting the windfall could bring dramatic changes to national coffers during recovery from a recession.

The Government has asked for the Apple tax ruling to be annulled on these grounds:

  • The Commission has misapplied State Aid law

    The Commission’s assertion that ASI and AOE were granted an “advantage” is incorrect. The Opinions did not depart from “normal” taxation, because ASI and AOE did not pay any less tax than was properly due under Section 25. The Commission also wrongly claims that the Opinions were selective. The Commission’s reference system wrongly ignores the distinction between resident and non-resident companies.

    The Commission attempts to re-write the Irish corporation tax rules so that, in respect of Opinions, the Revenue Commissioners should have applied the Commission’s version of the arm’s length principle (“ALP”). This principle is not part of EU law or the relevant Irish law in relation to branch profit attribution, and the Commission’s claim is inconsistent with Member State sovereignty in the area of direct taxation.

  • The Commission has wrongly applied the arm’s length principle

    Even if ALP were legally relevant (which Ireland does not accept) the Commission has failed to apply it consistently or to examine the overall situation of the Apple group.

  • The Commission has wrongly concluded that the tax treatment of ASI and AOE was not consistent with arm’s length principle

    The Commission wrongly rejected expert evidence submitted by Ireland showing that, even if ALP applied (which Ireland does not accept), the tax treatment of ASI and AOE was consistent with that principle.

  • The Commission’s alternative line of reasoning misunderstands Irish law

    The Commission is wrong to maintain that ALP is inherent in Irish law, that Section 25 was applied inconsistently or that Section 25 confers any impermissible discretion. Section 25 confers no such discretion on the Revenue Commissioners.

  • The Commission has failed to follow required procedures

    The Commission never clearly explained its State aid theory during the Investigation, and the Decision contains factual findings on which Ireland never had the chance to comment. The Commission breached the duty of good administration by failing to act impartially and in accordance with its duty of care.

  • The Commission wrongly invokes novel legal rules

    The Commission infringed the principles of legal certainty and legitimate expectations by invoking alleged rules of EU law never previously identified. These are novel and their scope and effect are wholly uncertain. The Commission invokes OECD documents from 2010, but (even if they were binding) these could not have been foreseen in 1991 or 2007.

  • The Commission has exceeded its powers and interfered with national tax sovereignty

    The Commission has no competence, under State aid rules, unilaterally to substitute its own view of the geographic scope and extent of the Member State’s tax jurisdiction for those of the Member State itself. The purpose of the State aid rules is to tackle State interventions which confer a selective advantage. The State aid rules by their nature cannot remedy mismatches between tax systems on a global level.

  • The Commission has failed to provide proper reasons for its decision

    The Commission has manifestly breached its duty to provide a clear and unequivocal statement of reasons in its Decision, in relying simultaneously on grossly divergent factual scenarios, in contradicting itself as to the source of the rule that Ireland is said to have breached, and in suggesting that Ireland granted aid in relation to profits taxable in other jurisdictions.

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