The 2016 decision by the European Commission that Apple owed Ireland more than €13 billion in back taxes put the then coalition government in an awkward position for one obvious reason.
Joining the company in opposing the ruling meant arguing that the money - roughly equivalent then to one year’s spending on health by the State - should not be paid. But, despite political flak from Sinn Féin, the decision was made to side with Apple, starting a seven year legal odyssey which still has some way to run.
At the time, the Government gave three reasons for its decision. One was the need to defend the integrity of the tax system. The second was the need to provide “tax certainty” to businesses - in other words if they paid their tax in Ireland, then this was an accepted part of the international system. And the third, according to then finance minister Michael Noonan, was “to challenge the encroachment of EU state aid rules into the sovereign Member State competence of taxation.” In plain language, Ireland was accusing the commission of a so-called land grab in an area where it did not have jurisdiction, using State aid competition rules in a new way. This is part of a story of long-running tensions between Ireland and the European Commission over corporate tax policy, with Dublin rebuffing successive attempts to reform the regime in a way which would benefit bigger countries.
While the political row was about Ireland “turning down” €13 billion, the reality was that Apple was going to appeal anyway. And if the original decision stood, Ireland had fears of the commission starting to examine other tax cases here, or of its ruling affecting foreign investment into Ireland by creating some doubts about the status of the Irish tax regime.
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Irish government policy has traditionally aligned itself with big multinationals here, on the basis that they are key providers of jobs and taxes. And little wonder. Since the Apple judgement in 2016, annual corporate tax revenues have multiplied from €7.5 billion then to close to €23 billion last year. These are recurring annual revenues - even if the outlook is now uncertain - while the Apple €13 billion would be a once-off payment, but nothing more.
Ironically, the international corporate tax reform process which sped up on the back of revelations of tax planning by Apple and a few other big players has - so far- been hugely to Ireland’s benefit. Apple and other major multinationals have restructured their operations to Ireland’s advantage, with a lot more revenue going to Irish operations and exposed to tax here. There are threats, too, to Ireland as this process continues, but the corporate tax base has moved to a whole new level.
The Government will continue to insist that legally the commission erred in its original decision and that the money it claimed was taxable here was not, in fact, liable to Irish taxation. It will say there was no special deal for Apple and that the Revenue correctly applied Irish law. The advocate general’s opinion suggests that a lot of the key issues here are still in play particularly if, as now seems quite possible, the European Court of Justice itself decided to return the case to the lower general court for fresh consideration.
In the meantime, while arguing that the commission’s ruling was incorrect, the Government will insist that tax policy here has moved on, that the key provisions used by Apple no longer apply and that Ireland is fully signed up to the OECD corporate tax reform process. The company, meanwhile, will point out that it has paid tax on the disputed revenues under new US rules brought in during the Trump tax reforms of 2017, which encouraged many multinationals to return cash piles built up abroad to America.
Meanwhile, the future of the money, sitting in an escrow account controlled by Ireland, remains unclear. It would now pay less than 60 per cent of the annual health budget for 2024 - but would still come in useful were the eventual ruling to come that Ireland should keep the cash.
