DUBLIN: The European Commission’s ruling to collect €13 billion in taxes from Apple is unjustified, Ireland’s Finance Minister Paschal Donohoe has said. The EU declared tax arrangements between Apple and Ireland — originally established in 1991 — had allowed the company to pay “substantially less tax” than rival companies, and were therefore illegal under state aid rules. Following a two-year investigation, the EU found that Ireland charges Apple only for on-the-ground sales and that already low European tax rates have been further lowered through the use of shell companies. Specifically, it was concluded that Apple had used two shell companies incorporated in Ireland so that it could report its Europe-wide profits at effective rates well below 1 percent, at one point paying a tax rate of just 0.005 percent.
In a recent interview with Germany’s Frankfurter Allgemeine newspaper, Donohoe said the tax rules from which Apple benefited had been available to all and were not tailored for the technology giant. As such, they did not violate European or Irish law, the minister added. In its legal submission against the EU’s ruling, the Irish Department of Finance claimed that it’s not only legal to levy far less tax on profits imposed by competitors, but that it’s the whole point of Ireland’s sales pitch to foreign investors. The department accused the European Commission of unfairness, incompetence, overstepping its authority, and interfering with Ireland’s sovereignty in national tax affairs.
The Irish government said it will collect the money pending an appeal of the ruling by Apple, but Donohoe maintained that the request was unjustified. “We are not the global tax collector for everybody else,” Donohoe said, according to the German newspaper. The money is presently being deposited in escrow. Donohoe also distanced himself from French and German proposals that the EU does more to prevent Chinese investors from buying strategically important European companies, saying this would endanger Europe’s reputation for openness. “We must be very careful not to endanger our reputation as advocates for free trade,” the finance minister said. In July, Reuters reported the US government was looking to intervene in Apple’s appeal against the ruling and had filed an application with the European Union General Court.
In the same month, the European Parliament passed a directive requiring big multinationals to report tax and financial data separately in all countries where they operate in a bid to tackle tax avoidance and profit shifting to countries with lower tax rates. However, the requirements need approval from the EU member states in the coming months, and would then need to be instituted into national law in each country within a year. EU countries lose between €50 billion and €70 billion in revenues every year because of tax avoidance, vice president of the European Commission Valdis Dombrovskis told lawmakers previously. The new measure would require firms with activities in the EU and an annual turnover of at least €750 million to disclose data such as profits, revenues, taxes paid, and number of employees for each country where they operate. Currently, multinationals disclose their operations in one consolidated report.
