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Noonan Updates Parliament On Apple State Aid Case

by Jason Gorringe,, London

06 February 2017

Irish Finance Minister Michael Noonan has argued that the reaction to the European Commission's decision in the Apple state aid case has "painted an outdated and unfair caricature of Ireland's position on tax that is at odds with the evidence and overlooks our proven track record in recent years."

In a statement to parliament's Joint Committee on Finance, Public Expenditure and Reform and Taoiseach, Noonan provided an update on the ongoing litigation in the European courts. The Irish Government filed an appeal against the Commission's ruling that Ireland had provided an unfair tax advantage to Apple in last autumn and released its legal reasoning in December.

Noonan said that the appeal is necessary for three reasons: to defend the integrity of Ireland's tax system, to provide tax certainty to businesses, and to challenge the encroachment of EU state aid rules into member states' competence in taxation.

"It is very damaging for our reputation to be called into question in this way. This affects how Ireland could be treated by other jurisdictions, damages Ireland's credibility in the international tax debate, and inhibits Ireland in pressing arguments that serve our national interest," he warned.

Turning to the location of Apple's business operations, Noonan stated: "Everyone knows that the iPhone and other well-known Apple products were developed in the US, not Ireland. Our tax legislation, which reflects international norms, only allows us to tax non-resident companies on the profits they make in Ireland. As a result, the bulk of Apple's profits were not subject to Irish tax."

Noonan was likewise critical of the Commission for "attempting to re-write Irish corporation tax legislation." He said the Commission had extended "competition rules into the tax area to an unprecedented and unjustified extent."

"By doing this the Commission creates uncertainty for business and investment in the European economy, both in its novel interpretation of longstanding rules and their unfair retroactive application."

Notwithstanding the appeal, Ireland is legally required to recover the alleged state aid from Apple. The Commission had previously estimated this at EUR13bn (USD13.9bn) plus interest. However, Noonan said that this figure is not included in the Commission's final decision, meaning that Ireland is required to calculate the amount owing based on the methodology set out in the decision.

"This looks back over a 10-year period for two companies and involves over 20 separate computations, taking into account any relevant tax paid in other jurisdictions. The EU interest provisions are then applied to the amounts applying a methodology that is set out in an EU Directive," he explained.

According to Noonan, it is too early to speculate on what the final figure will be. The Government has been working with the Commission and Apple to calculate the amount owed, and is "exploring how to place the sums in a ring-fenced escrow fund pending the outcome of legal proceedings."

"It would be irresponsible and extremely short-sighted to consider the decision as a windfall for the state," he said.

Noonan added: "Based on the Commission's view that the recovery sums may be reduced if other countries were to require Apple to pay more taxes, the ultimate entitlement of Ireland to this money in the face of competing claims from other jurisdictions is highly uncertain. We simply cannot spend money that we are not confident we are entitled to."

The formal deadline for recovery was January 3, 2017. The Government has requested an extension to this deadline. "Work has been on-going to ensure that the state complies with the recovery obligations and this will continue in regular contact with the Commission to ensure that they remain satisfied with Ireland's progress," Noonan said.

TAGS: court | Finance | tax | investment | business | European Commission | Ireland | interest | corporation tax | ministry of finance | tax authority | legislation | transfer pricing | Europe | BEPS

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