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.