State and Apple near deal over billions in back tax

The State is nearing an agreement with Apple on how to manage back tax it has been ordered to collect from the iPhone maker, even as it appeals a 2016 European Union ruling that the money is owed in the first place.

Sources said the agreement would allow the Republic to issue an invitation within weeks for tenders from investment managers and custodians to take care of what the EU alleges to be €13 billion of illegal state aid Apple received in the decade to 2014.

A spokesman for Apple and a spokeswoman for the Department of Finance declined to comment.

The Government has agreed to collect the money and hold it in escrow until appeals relating to the case are heard by EU courts, a process that could take between four and six years. It’s more than six months since it missed an original EU deadline to collect the funds.

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While the EU's competition commissioner, Margrethe Vestager, complained in May that the Government was "taking too long" to collect the taxes, Minister for Finance Paschal Donohoe was informed by his officials in a briefing note last month that "intensive calculation work" had been going on in the background for months.

Interest

The notes revealed that the EU estimates interest due on the unpaid taxes “to be under €2 billion”.

It is understood that officials from the Revenue Commissioners are still calculating the amount of money to be collected, as they must align the formula behind the EU’s estimate with Irish tax law. Sources said it would take some months before the State would begin to collect the money.

"Significant State resources have been dedicated to the matter – led by the tax and banking divisions of the department and including officials from the Revenue Commissioners, the National Treasury Management Agency and Attorney General's office," according to the briefing notes.

“Given the scale of the bespoke nature of the fund, the precise terms are still being developed and negotiated with Apple and the commission, involving commercially sensitive deliberations. It is expected that the arrangements (including signed contracts) will be in place and the initial funding paid over to the fund before the [escrow] fund before the end of the year.”

One of the key issues the Government has been focusing on in recent times is securing an agreement that Apple will not sue it if it fails to deliver sufficient returns or accrues losses on the money while it is held in escrow.

The sheer amount of money involved means the funds cannot merely be transferred into a bank account.

At the end of Apple’s last financial year in September 2016, only $20.5 billion of the technology giant’s $237.6 billion “cash” hoard was actually made up of cash or equivalents.

The remainder is invested in corporate bonds, US and other government debts as well as mortgage- and other asset-backed securities.