On August 30th, the European Commission decided that the tax arrangements granted by Ireland to Apple amount to a State Aid and therefore sentenced Ireland to recover up to €13bn from the US company. Our recap of the case.
After more than 2 years of investigation, the European Commission reached the conclusion that tax arrangements granted by Ireland to Apple amount to a State Aid and therefore sentenced Ireland to recover up to €13bn, plus interests, from the US company (see press release).
Under EU law, a State Aid is an advantage in any form whatsoever, conferred by a Member State’s national public authorities to one or a few number of local companies, on a selective basis, which has the effect that the competition within the EU market has been or may be distorted and trade between Member States is likely to be affected. State Aids are generally prohibited unless they are justified by reasons of economic general development as strictly permitted by EU law.
Back to June 2014, the European Commission had decided to launch an in-depth investigation regarding two tax rulings granted by Ireland to Apple that “could have substantially and artificially lowered the tax paid by the US company since 1991”. The European Commission argued that Apple only paid an effective corporate tax rate that declined from 1% in 2003 to 0.005% in 2014 of the profits of Apple Sales International. In its decision, the European Commission requested Ireland to recover from Apple the unpaid tax – considered as State Aid – for the period between 2003 and 2014.
Further to the official statement by Margrethe Vestager, European Commissioner for Competition, Tim Cook, Apple CEO, published a “Message to the Apple Community in Europe”, stating that “the European Commission has launched an effort to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the international tax system in the process”.
The US Treasury expressed disappointment at what it called an “unfair” decision and stated that “the Commission’s actions could threaten to undermine foreign investment, the business climate in Europe, and the important spirit of economic partnership between the US and the EU”. The Commission’s decision can hence be seen as another step in the growing tension between the US and the EU regarding the treatment of companies on both sides of the Atlantic, which was notably exacerbated in 2015 by the $8.9 billion fine imposed by the US authorities to BNP Paribas as a sanction for the transactions in dollars realized by the bank with countries under US embargo (see decision).
Minister Noonan, Irish Minister for Finance, stated that “hedisagrees profoundly with the decision issued by the European Commission” on this case and “hewill now seek Cabinet approval to appeal the Commission decision to the European Courts”. Ireland has already said that it would appeal the decision, a politically sensitive move given the sums at stake and the costs induced by an appeal procedure.