European Commission takes Ireland to court over Apple taxes

The commission is taking Ireland to court over failing to collect €13 billion in back taxes from Apple, and has ordered Amazon to pay around €250 million to Luxembourg.

The European Commission is taking Ireland to the European Court of Justice (ECJ) for failure to recover €13 billion in back taxes from Apple, a move Dublin labelled as "regrettable".

The commission said on Wednesday that the deadline for Ireland to implement its ruling had been January 3, 2017, and until the taxes are recovered, Apple will continue to benefit from an illegal advantage.

After a two-year investigation, the European Commission declared in August 2016 that tax arrangements between Apple and Ireland, originally established in 1991, allowed the company to pay "substantially less tax" than rival companies, and were therefore illegal under state aid rules.

The commission concluded that Apple had used two shell companies incorporated in Ireland so that it could report its Europe-wide profits at effective rates well below 1 percent, at one point paying a tax rate of just 0.005 percent.

"More than one year after the commission adopted this decision, Ireland has still not recovered the money," EU Competition Commissioner Margrethe Vestager said on Wednesday, adding that Dublin had not even recovered a portion of the sum.

Vestager refused to comment on possible penalties on Ireland if it failed to comply with an eventual ECJ ruling against it.

Ireland's finance ministry said it had not accepted the commission's analysis in the Apple state aid decision, but was committed to collecting the unpaid taxes pending an appeal of the ruling by Dublin.

Apple is also appealing the case.

The finance ministry additionally said it had been in constant contact with the European Commission and Apple for more than a year and was close to setting up an escrow account, through which the money will be deposited.

Ireland's Finance Minister Paschal Donohoe said that the government was in "commercially sensitive" talks with Apple about the exact terms of the transfer.

In an interview with Germany's Frankfurter Allgemeine newspaper in August, Donohoe called the ruling unjustified, adding that the tax rules from which Apple benefited had been available to all and were not tailored for the tech giant. As such, they did not violate European or Irish law, the minister had said.

In its legal submission against the EU's ruling, the Irish Department of Finance claimed that it's not only legal to levy far less tax on profits imposed by competitors, but that it's the whole point of Ireland's sales pitch to foreign investors.

The department accused the European Commission of unfairness, incompetence, overstepping its authority, and interfering with Ireland's sovereignty in national tax affairs.

"We are not the global tax collector for everybody else," Donohoe said, according to the German newspaper.

Donohoe also distanced himself from French and German proposals that the EU does more to prevent Chinese investors from buying strategically important European companies, saying this would endanger Europe's reputation for openness.

"We must be very careful not to endanger our reputation as advocates for free trade," the finance minister said.

Vestager also revealed on Wednesday that the European Commission has ordered Amazon to pay about €250 million in taxes to Luxembourg, though the exact amount of tax to be repaid will need to be calculated by Luxembourg authorities.

According to the commission, Amazon received illegal tax advantages between 2006 and 2014 in Luxembourg without any "valid justification". It concluded that the online retail giant had transferred a large portion of its profits from a company that was subject to tax in Luxembourg to a shell company it incorporated in the country that was not subject to the same tax obligations.

"In fact, the ruling enabled Amazon to avoid taxation on three quarters of the profits it made from all Amazon sales in the EU," Vestager said.

"In other words, Amazon was allowed to pay four times less tax than other local companies subject to the same national tax rules. This is illegal under EU state aid rules. Member states cannot give selective tax benefits to multinational groups that are not available to others."

Amazon said in a statement that it does not believe it received any special treatment from Luxembourg, adding that it paid tax "in full accordance with both Luxembourg and international tax law."

Amazon is considering an appeal of the ruling.

"We will study the commission's ruling and consider our legal options, including an appeal. Our 50,000 employees across Europe remain heads-down focused on serving our customers and the hundreds of thousands of small businesses who work with us," Amazon said.

In July, the European Parliament passed a directive requiring big multinationals to report tax and financial data separately in all countries where they operate in a bid to tackle tax avoidance and profit shifting to countries with lower tax rates.

However, the requirements need approval from the EU member states in the coming months, and would then need to be instituted into national law in each country within a year.

EU countries lose between €50 billion and €70 billion in revenues every year because of tax avoidance, Vice President of the European Commission Valdis Dombrovskis told lawmakers previously.

The new measure would require firms with activities in the EU and an annual turnover of at least €750 million to disclose data such as profits, revenues, taxes paid, and number of employees for each country where they operate.

Currently, multinationals disclose their operations in one consolidated report.

With AAP

Show Comments