DÁIL QUESTIONS WITH THE MINISTER FOR FINANCE ON APPLE TAX APPEAL

  1. Deputy Thomas P. Broughan asked the Minister for Finance the position with regard to the EU state aid judgment concerning a company (details supplied), in particular on the collection by the Revenue Commissioners of outstanding tax from the company, on the proposed escrow account and on the preparation of Ireland’s appeal; his views on whether similar EU judgments may be faced by other multinationals based here; and if he will make a statement on the matter. [27553/16]

Deputy Thomas P. Broughan: I am asking for an update on the situation since the debate in the House three weeks ago, in particular what preparations have been made so far in regard to the appeal. The Minister mentioned a two-month period in his response during that debate. What is happening in regard to Revenue collecting the €13 billion-plus from Apple and with regard to the escrow account? What is the likely cost of the appeal? Is the Minister worried there will be similar judgments against companies based in Ireland in the future?

Deputy Michael Noonan: On 30 August 2016 the European Commission issued a negative decision in the Apple state aid case. The Government profoundly disagrees with the Commission’s analysis in the Apple case and will now challenge the decision before the European courts.  Dáil Éireann has also passed a motion supporting the Government’s decision to appeal the European Commission’s decision.

Ireland has a period of two months and ten days to bring an appeal.  The appeal process may take several years.  Apple also has indicated that it will exercise its right of appeal.  An appeal to the European courts takes the form of an application to the General Court of the European Union, asking it to annul the decision of the Commission.

Ireland’s position remains that the full amount of tax was paid in this case and no State aid was provided.  Ireland did not give favourable tax treatment to Apple.  Ireland does not do deals with taxpayers.

Notwithstanding the negative decision, no fine or penalty has been imposed on the State. The European Commission has stated: “This decision does not call into question Ireland’s general tax system or its corporate tax rate”.  No other companies are subject to this decision by the European Commission.

On foot of the Commission’s decision, Ireland is required to recover up to €13 billion of alleged state aid from the company covering a ten-year period.  Notwithstanding the right of appeal, Ireland is legally obliged to recover the alleged state aid from Apple in the interim.  Given that this money may ultimately have to be returned to the company in the event of a successful appeal, the money can be held in escrow until the case has concluded.

The Commission has stated that the amount of unpaid taxes to be recovered by the Irish authorities would be reduced if other countries were to require Apple to pay more taxes on the profits recorded by Apple Sales International and Apple Operations Europe for this period; and the amount of unpaid taxes to be recovered by the Irish authorities would also be reduced if the US authorities were to require Apple to pay larger amounts of money to its US parent company for this period to finance research and development efforts. This illustrates the contradiction at the heart of the European Commission’s decision.  While requiring Ireland to recover the tax sums, the Commission is also acknowledging that the sums may in fact be taxable in other jurisdictions.

Deputy Thomas P. Broughan: Has the Minister or his Department had any contact with senior Apple executives since the decision and since the 93-36 vote in this House? With regard to the preparation of the case by the Attorney General, is the Minister keeping an eye on the grounds for that case? Is it just on state aid grounds, as the Minister has said, or is there a broader case?

With regard to the cost, the Minister said this will go on for several years. Obviously, Fine Gael, Fianna Fáil and, I think, the Labour Party made the decision to proceed with this costly appeal. What does the Minister consider will be the cost to the country? Has the collection of the money started and is the escrow account in existence? How will it be treated in our national accounts? Have any of the countries which have a claim on this money – we heard Spanish Ministers talking about it – been in contact with the Minister?

Deputy Michael Noonan: The Attorney General’s office is preparing the grounds for the appeal, the detailed appeal papers and so on and that is directed by the Attorney General herself. She has two months and ten days from the date of the decision and she is working expeditiously on it.

I have no hard information yet on the collection of arrears but it is the responsibility of the Revenue Commissioners. Some contact has been made with the company and so far there does not seem to be a barrier to the collection of the arrears. However, the calculation of the arrears may be difficult because it goes from 2014 back to 2004, a ten-year period, even though the tax opinion on which the case was made initially commenced in 1991. It is a very peculiar kind of judgment.

The NTMA will look after the escrow and how it will appear in the Government accounts is a matter for discussion at the moment. I will keep the Deputy up to date but that is the information I have at present.

Deputy Thomas P. Broughan: I understand that on Monday last, the Minister met Pascal Saint-Amans, the director of the OECD Centre for Tax Policy and Administration. He apparently said that the IRS in the United States could be entitled to much of this money. In the context of the forthcoming finance Bill, will there be any more impacts from this ruling in regard to our progress on base erosion and profit shifting, BEPS? On an issue we have been discussing at the budget committee, is the Minister confident loopholes are being closed off fast enough to ensure the Minister has more wriggle room on the fiscal space?   I note The Guardian newspaper on 18 September published an open letter from the US Business Roundtable group to 28 leaders of the EU which reads like a veiled threat to the EU on future US investment here and refers to the judgment as a “grievous self-inflicted wound” for the EU and its citizens. Is the Minister aware of this?

Deputy Michael Noonan: Pascal Saint-Amans, who is the tax director of the OECD and was in charge of the BEPS project, visits us regularly and he was here last Monday.

He was asked questions about the Apple decision at a press conference he held. He stated two things of importance: first, that in his view the arrears were due to the exchequer in the United States and second, that there was no threat from the Commission or anywhere else to Ireland’s 12.5% rate and that under law and the European treaties we were absolutely entitled to maintain the 12.5% rate.

The issue of the arrears being due to the American exchequer arises from the fact that Apple paid a very low amount of tax internationally. That has been recited several times, but Apple had a significant tax liability, as distinct from the tax it paid. The tax liability turns into payable tax when profits are repatriated to the United States under US law. His view, and that of the OECD, that the arrears are really due to the United States is because that is where the economic activity took place. That is where the iPad and the iPhone were developed and that is the source of Apple’s profitability and if the profits are repatriated to the United States the company’s liability for US tax will trigger in to the actual payment of tax at 35%.