Ireland loses Apple billions, but wins tax vindication for now
For Ireland, a ruling that it didn’t illegally help Apple Inc. is vindication, of sorts.
On Wednesday, a European Union court sided with the iPhone maker and the Irish government, saying the European Commission failed to show the nation’s tax arrangements amounted to state aid. In the process, it struck down a demand that Apple must pay a record 13 billion-euro ($14.9 billion) tax bill, surprising Dublin officials, who were braced for a loss.
The government elected to fight the 2016 decision alongside Apple, a move that puzzled voters who couldn’t fathom why the country wouldn’t accept a windfall from one of the globe’s richest companies. The counter argument was Ireland had done nothing wrong, and caving in risked adding to the perception that the country played fast and loose on tax and could ultimately cost jobs.
“It takes the pressure off Ireland in terms of its reputation on corporation tax,” Conall MacCoille, chief economist at Davy, a Dublin-based securities firm. “And it’s a bad day for the European Commission to have their signature Apple tax decision deemed unlawful.”
Four years ago, then Finance Minister Michael Noonan called the Commission’s findings an attack on the nation’s 12.5 percent corporate tax rate, the cornerstone of its economic policy, even though the case didn’t center on the actual tax rate. U.S. firms, like Apple, directly and indirectly account for about 20 percent of Irish jobs.
Ireland won the most foreign investment projects in Europe on a per capita basis in 2019, according to advisory firm EY, and its success has long frustrated some treasuries in the European Union who feel they are losing out on tax revenue from U.S. companies that have based their EU operations in the country.
As long ago as 2011, then Prime Minister Enda Kenny vowed to defend the country’s tax sovereignty after a “good Gallic spat” over corporate levies with French President Nicolas Sarkozy, who wanted the Irish to raise their tax rate.
“Ireland has always been clear that there was no special treatment,” the finance ministry said after the court decision.
The country didn’t escape from the ruling untouched, however. The Court said it regretted the “incomplete and occasionally inconsistent nature” of the contested tax rulings, and the EU is certain to appeal.
The decision may stiffen the resolve of some European capitals to tackle tax avoidance by technology companies. Plus even a share of the 13 billion euros would have been useful for Ireland as it comes to terms with the financial impact of COVID-19.
“This is really a black day for tax justice and tax efficiency in the European Union,” said Sven Giegold, a German member of the European Parliament. “This cannot wait any longer in the face of the high spending we are having because of the corona crisis.”
— With assistance from Natalia Drozdiak, Stephanie Bodoni and Aoife White