The Irish Times view on the Apple tax case: Ireland may never see the €13.1bn

The saga which started with a European Commission ruling in 2016 is slowly moving to a conclusion and the ruling has big implications for its State aid policies

Apple's Irish operation  in Hollyhill, Cork. (Photograph: Michael MacSweeney/Reuters)
Apple's Irish operation in Hollyhill, Cork. (Photograph: Michael MacSweeney/Reuters)

The long-running saga in relation to €13.1 billion in tax which the European Commission says Apple owes to Ireland is moving slowly to a conclusion. On Tuesday, the commission, Ireland and the company put their case to the European Court of Justice in an appeal hearing against an earlier decision by a lower court. By next year we will have a final conclusion.

The European Commission’s decision on the case was made as far back as 2016 and relates to tax paid by Apple in Ireland going back to the 1990s. The essence of the case is an assertion by the commission that Ireland breached EU state aid rules by offering special tax deals to Apple. The company and Ireland deny this and in July 2020 the EU General Court ruled in their favour.

Tuesday saw an appeal against this decision by the commission, a one-day hearing in which all sides could make their case in relation to the original ruling. Common sense would suggest that the lower court’s decision was correct. It seems fanciful to argue that Apple owed tax on all its international earnings in Ireland. After all, the brainpower behind its key products lie in the US and key decisions are made there. Apple claims the tax was, effectively , paid in the US.

Nonetheless the commission argued that the EU General Court had erred in law and we will have to see what the higher court decides.

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As well as being important for Ireland and for Apple, it is also a key decision for the European Commission. Former competition commissioner, Margrethe Vestager pioneered the use of State Aid rules as a weapon to be used in tax rulings. But a number of the key rulings were struck out on appeal and losing the Apple case would be a significant blow.

Major multinationals have for years used aggressive tax planning to reduce tax payments. Apple, along with the other big players, insists that it always pays what is legally due. Ireland, like many countries, used tax as a tool to attract investment, and in some cases pushed its luck by introducing, or extending, mechanisms used by multinationals. US tax law has also played a key role.

OECD tax reform, to which Ireland is party, have made some progress in reducing the ability of big players to shift profits around the world. Ironically, Ireland was a big winner from the first phase of this reform. Now the corporate tax rate here will go up to 15 per cent for big players, bringing in more revenue, though other parts of the latest OECD plan could threaten revenues here.

Ireland may never see Apple’s €13.1 billion ,but the country has benefited hugely from corporation tax payments, even if the future of this windfall remains uncertain. Adherence to the OECD reform process – some of which unfortunately remains in doubt – continues to look like the best way to gradually squeeze big companies to pay their fair share.