Poor little Ireland is squeezed in the battle of the titans

The  basic foundation for the Celtic Tiger and the best hope for its revival? Or a scam that makes Ireland no better than tax haven? The day of reckoning may have arrived – subject to appeal.The Commission insists that they money must be used to pay down Irish debt anyway.  Ireland backs away from treating the EU Commission’s implied offer of a €13 billion windfall from Apple because of real fears that wider FDI will dry up if other foreign investors are hammered likewise. Why pick on Ireland to teach a lesson with a global reach ? The FT (£) explains:

About 90 per cent of Apple’s foreign profits are earned by Irish subsidiaries, which are highly profitable because they hold rights to Apple’s intellectual property.

But these Irish entities paid little tax because they were not tax resident anywhere — a structure that exploited differences between the US and Irish definitions of residence.

“Only €50 tax paid for every million earned” by Apple is the Commission’s judgement – a far cry from the general Irish corporate rate of 12.5%.   Creating a level playing field is what the Commission does. The politics of any particular nation is subordinate. This one reason why  the UK is leaving.  Cliff Taylor puts it neatly in the Irish Times. The Irish state will argue that it’s not their fault that Apple R&D is not taxed in the States. They will argue that the burden – and it is a burden – should be shared more equitably among other states where Apple has a presence.

Ireland is caught right in the middle. It is a decision which will involve significant collateral damage for Ireland, which has always claimed to have a transparent and legally based tax system. The Revenue is merely meant to apply the rules in collecting tax here.

 The European Commission has found that it offered Apple a “selective advantage” by the way it applied the rules to the US multinational – in other words it gave it too generous a deal, and one which was not on offer to other companies.

The Government and the Revenue strongly deny this and Ireland will take the fight to the European courts. However the scale and high profile of the judgement means Ireland – and the IDA – will have a fight on their hands.

 

 

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  • chrisjones2

    The Irish response to this is very odd. Irish tax take is around €60 bn a year. If the Commission is correct this €13bn would be a huge boost to the taxpayer.

    It could be used, for example, for a massive boost of say €4000 per citizen as a one off tax rebate. Is that not worth fighting for? Then if that is applied to Microsoft and all the other local brass plate companies the tax take could perhaps eliminate the national debt and rebase the whole economy while gaining kudos from Ireland’s EU partners

    Surely there is a real debate to be had here?

    In any case, does Ireland have any choice now the Commission has instructed it on what to do?

  • chrisjones2

    “Poor Little Ireland ” = MOPE? Can SF blame the Brits for this one too?

  • Jollyraj

    “It could be used, for example, for a massive boost of say €4000 per citizen as a one off tax rebate”.

    Interesting idea. One presumes it would exclude people who simply hold an Irish passport but choose to live in England, Northern Ireland or wherever?

  • “However the scale and high profile of the judgement means Ireland – and the IDA – will have a fight on their hands.”

    Well, Cliff Taylor might be right. But on the other hand…

    The European Commission will definitely have a fight on their hands. And not just with Ireland.

    Apple, natch, are not happy. And neither are the US Treasury who view this very much as over-reach by the Commission.

    The US do want Apple to pay more tax, but in the US.

    The BBC’s Rory Cellan-Jones highlights the central issue

    How should we tax giant technology companies that are able to move money, operations, and often digital goods across borders with increasing ease?

    That is at the heart of today’s European ruling.

    The European Commission believes the time has come for radical action to force multinationals to pay more and stop governments competing to offer them special treatment. But it faces battles on many fronts.

    Among those fronts…

    The technology company seems confident that the commission is acting way beyond its own rules in interpreting tax deals – and by the way, Apple denies it got anything that wasn’t open to others – as illegal state aid.

    It has been pointing journalists towards a recent article by a legal expert suggesting that the commission’s use of state aid as a tool to drive tax reform “threatens to undermine the rule of law”.

    And then there is the United States government, which last week got its retaliation in first by warning that the EU was trying to become some kind of global tax authority, and was discriminating against American firms.

  • Kevin Breslin

    A strangely two sided argument … did you read this bit?

  • Kevin Breslin
  • Katyusha

    Well, duh. How would you get a tax rebate from taxes you don’t pay?
    You pay tax in the country you work in, passport and citizenship be damned. Are you envisaging the Irish Government sending a cheque to the multitude of its citizens working in the US and elsewhere?

    If you live in NI and work in the ROI, you’ll pay tax to the Irish Exchequer and if you’re entitled to tax relief you can claim it. Not exactly hard to understand, Jolly.

  • Jollyraj

    I wasn’t being entirely serious – nonetheless, in your eagerness to disagree with my point I think you might have missed it. The government doesn’t own tax revenue – it is collected and distributed on behalf of the people. Thus, the eye-watering amount of tax not collected from Apple and others is revenue that cannot be spent on hospitals and publuc facilities for Irish people living in Ireland (not elsewhere), so the Irish people living in Ireland are indeed getting shortchanged.

  • chrisjones2

    I always understood it was domicile that normally counted?

  • Reader

    Cliff Taylor: Ireland is caught right in the middle.
    What a dilemma – take the cash and abandon the economic advantages of being a tax haven; or keep the advantages, but abandon the cash.
    I see that there are people already here on this thread who think that the correct answer is obvious.

  • Reader

    Kevin, how about the A5?

  • terence patrick hewett

    Bit like bombing Pearl Harbor.

  • Sprite

    If Ireland is compelled to use it to pay back debt it’ll make no real difference to taxpayers. Still, there’s a chance the UK might get repaid the bailout loan it gave Ireland.

  • Katyusha

    With respect, it’s difficult to tell with you sometimes, if you’re being serious or not. If you’re concerned about the Irish taxpayer being shortchanged you could have simply come out and said as much, you know?

  • Brendan Heading

    The Commission insists that they money must be used to pay down Irish debt anyway

    where did you find this Brian ?

  • Gopher

    Its a shake down to pay off the Republic’s debt. It is also laying down a marker that Europe is calling the shots now the UK is gone.

  • Declan Doyle

    We will forever live with the corrupt practises of consecutive Fianna Fail Fine Gael governments. We can get over a war but will be always haunted by the gross negligence of out bigger parties.

  • 05OCT68

    Ireland is a tax haven for the big corporations. I worked for a large American corp, it used to be incorporated in the Cayman Islands, I think it was in that building Obama referenced in a speech. The company incorporated in Ireland a few years ago, incorporating in Ireland sounded better than incorporating in the Cayman Islands.

  • Declan Doyle

    Whilst I have no idea what jol has said as I blocked him weeks ago I would say to you Kat that sometimes in a playpen it can be helpful to distinguish between the boisterous but knowledgeable child and the whingeing ignorant type.

  • Roger

    There’s a good chance the UK will get repaid….Ireland is already repaying it as per the agreement….

  • Roger

    I certainly know persons who don’t live in their country of citizenship but pay tax there…Some have investments in their home country.

  • Roger

    With the kingdom leaving the EU, Ireland will be hoping to attract more FDI that might have gone to the kingdom. This ruling won’t be well received in Ireland, but is good news for the kingdom.

  • Katyusha

    That would work as well, naturally.
    Personally I’m not rich enough to earn money without working for it, so it never crossed my mind 😉

  • John Collins

    Chris
    You know that when the story looks too good to be true it more often than not is then untrue. Even if Apple agreed to part with the 13 Billion the US and other European Countries would get their ‘sweaty grasping hands’ on considerable portions of it, ‘the greedy unscrupulous bastards’.
    I agree there is room for a real debate, especially when you bring the other multi nationals into that discussion.

  • John Collins

    The UK authorities are getting something like 6% interest on their investment. They would be mad to look for their money back, while it is accruing such a high rate.

  • John Collins

    Ouch Kevin. I have just made a mental note for myself not to respond to any of your posts lest I get a rejoinder like that.

  • Tochais Siorai

    It’s generally easier for those to ‘get over’ a war when they didn’t suffer any direct consequences from it.

  • Skibo

    Jolly I have no axe to grind here as I do not know enough about the full issue but I believe the Irish Government will have to look at how this result will affect their relationship with other multi-national companies.
    They will not just be considering the loss of Corporation Tax but also the loss of high paid jobs which will be paying substantial amounts of income tax also.
    Possibly demanding the payment of the £13B plus interest may result in a greater loss in the overall scheme of things.