A lengthy legal battle could lie ahead for the Government if European authorities rule against it in relation to its tax dealings with US tech giant Apple.
Sources yesterday indicated that European authorities are likely to back their preliminary findings of last year, in which they said the iPhone maker’s tax arrangements were improperly designed to give the iPhone maker a financial boost in exchange for jobs.
Apple employs 4,000 workers at its European headquarters in Cork City — 25% of its workforce across the continent.
The European Commission has taken a keen interest in Apple’s tax affairs in Ireland and in June 2014 launched a probe to determine if the Government had improperly afforded Apple state aid in the form of lower corporation taxes.
In a worst-case scenario, Apple may face a $19bn bill if the Government loses its case and is forced to recoup tax from the company, said JPMorgan Chase analyst Rod Hall.
An Apple spokeswoman was not able to comment on any possible commission finding yesterday. The European commission declined to comment, while Ireland’s finance ministry said no final decision has been taken.
After the commission laid out its preliminary findings in June 2014, it asked the Government for comments and more information about its dealings with Apple.
Three months ago, EU antitrust commissioner Margrethe Vestager said she would be seeking to conclude shortly the probes into Apple, as well as the tax dealings of Amazon.com and Starbucks elsewhere in Europe. Vestager’s team missed a self-imposed deadline to complete the cases by the middle of the year.
The Government would have a strong legal case to fight an adverse finding, said Michael Ryan, head of the tax unit of Dublin-based law firm McCann Fitzgerald, which is not involved in the case.
The guidance tax officials gave Apple representatives in 1991 and 2007 on how it attributed profits to its Irish branch can not be considered a binding tax ruling.
“Legally in Ireland, it is not possible for the Revenue Commissioners to give rulings that are binding,” said Mr Ryan.
The EU did not show in its initial findings last year that Apple benefited from its Irish tax dealings, he said. Irish tax authorities were satisfied that the profits attributed by Apple to its Irish units were correct, the commission said.
“The commission would have to show this was not the case to justify a negative ruling,” said Mr Ryan.
The EU’s state aid decisions can be challenged at the European courts. While any recovery of back taxes would not go beyond June 2003, Apple may have to figure out how to account for any unpaid taxes.
Apple could still escape a recovery order even if the commission rules that Ireland’s tax dealings with it are illegal.
In any of the state aid cases being pursued by the commission, establishing the exact sum to be paid by the companies is complex, according to Howard Liebman, a tax partner at law firm Jones Day in Brussels.
“There is a question mark as to what would be the recovery amount,” said Mr Liebman. “But if there’s no recovery, they’re going to face a firestorm of negative press.”
Bloomberg, additional reporting by Irish Examiner staff
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