I think the EU ruled that Apple's deal violated Irish law, not EU law. The 0.005% effective tax rate should of been a fair bit closer to Ireland’s 12.5% corporate tax rate.
This is unlikely, given that not surprisingly the judicial arms of the EU typically deal in EU law, not the laws of individual member States. It's pretty rare for a supra-national body like the EU to enforce individual State level legislation, as opposed to treaty obligations or similar.
In this particular case it was a breach of EU state aid rules, Ireland's Government has been very much opposed to the decision, which is why comparisons to the IRS don't really work all that nicely. From a legal perspective it's really more a question of competition law than tax.
It was a violation of Irish competition law, which as a part of the EU is harmonised with EU law. Seemingly the Irish officials were unaware of certain nuances, or at least were blithely ignorant.
It was not a violation of competition law either. The EU's basis for forcing Ireland's hand here is a novel redefinition of "state aid". Previously this part of the EU treaties had been understood to be talking about subsidies. The language contains a reference to the usage of "state's own resources" which is EU speak for government money. The goal was to stop the common practice of governments bailing out national champion firms.
But the EU can be relied upon to expansively re-interpret its powers after they have been agreed. It happens frequently. They have since decided that in Ireland's case, low tax rates are the same thing as direct subsidies. Obviously Ireland is not giving money to Apple, it's the other way around, but now "not enough" money is considered by the EU to be illegal.
This interpretation of the treaties was never raised previously and not surprisingly Ireland was very upset about it, as they'd been given assurances the EU would not interfere with their low corp tax regime. That's why Ireland is fighting it on Apple's side. It's not just about Apple. It's about the EU taking control of a policy that the Irish government thought they controlled.
That's not the case. Sorry. It certainly isn't that the EU redefined anything. These rules are quite clear.
What is less clear is the nuances of "just how" Apple was given favourable treatment.
It's very much in the fine details of Ireland's agreement with Apple, but what it boils down to is that Ireland gave an evaluation of Apple's tax liabilities tailored to Apple.
Even without this, Apple's tax liabilities would have been highly favourable but it is this "technical" matter that puts Apple & Ireland over the line, and is the basis of the 13bn figure, which is only a fraction of what Apple actually manages to avoid paying with their creative tax practices.
The best plea that Ireland can make in this regard is ignorance, but now that rules have been clarified the adjustments must be made.
I felt that Apple's whole response to this was highly disingenuous and inflammatory.
You should really discuss that with a tax lawyer. If the rules are so clear then why was Ireland taken by surprise and why did they fight it? The relevant section of the treaties are quite clear and readable. They simply would not be interpreted by any normal person in this way.
It is a power grab by the EU in an area that the treaties explicitly state the EU does not control. End of story.
edit: Also see below where I discuss the article in question, which is anything but clear
Why? If a company has $200B it wants to deposit in your banks, what tax rate should it pay on the interest on that deposit? If Ireland said 12.5% (which is ridiculously high), Apple would have deposited it somewhere else, outside of the EU likely.
Accepting bank deposits is a good thing, it didn't create any costs for the government of Ireland. On the contrary, it likely funded lots of economic development. Which is exactly why Ireland did and should have offered a near zero tax rate.
> On the contrary, it likely funded lots of economic development
It funded "a little" development. Provided a bunch of jobs down in Cork and the promise of a few more once their (now reneged upon) datacentre came online in Athenry. Nontangibles include putting Ireland on the tech map.
But, whatever the appropriateness of the remuneration for Ireland, the taxation was being applied Europe wide for access to the broader European economy.
So this tax is not only due to Ireland but the European economy as a whole.
I'm sorry if these nuggets of truth get under some people's skins but that's how it is.
I'm not sure if you're actually ignorant of the argument, or if you just chose to pretend you'd never heard it. But, basically, it is:
The EU has rules to prevent a race to the bottom. In the long term, they are good for every single EU country, because they allow to actually tax companies, instead of lowering taxes to around 0.01 Euros annually otherwise. Yes, Ireland may have made the best offer this time around. But a year later, it would have been Croatia or Luxembourg.
The value of having a base within the EU is shown by Apple going to Ireland, instead of 0-tax jurisdictions like the Caymans. That value, which Apple uses to create its profit, needs to be financed by taxes.
The EU actually convinced Apple to move their savings to the Isle of Man. That's not a race to the bottom, that's throwing the baby out with the bath water. Taxing bank deposits like you tax an operating business is a ridiculously dumb policy.
There are many countries that don't tax the interest on bank deposits, just none in the EU anymore. And those countries are where the EU is driving companies to move their deposits to.
For now. We’re not going to continue to let these unethical companies to operate in the EU forever without contributing.
You probably think this sounds silly, but it’s what the majority of the voters here want and the EU though slow is moving with the people not the corporations.
The Irish Corporation Tax rate is 12.5%, but the interests from bank deposits are subject to the Deposit Interest Retention Tax with the current rate of 39%.
I'm not certain if you are just being obtuse, but the entire arrangement Apple (and other companies) have set up with Ireland, is to avoid taxation inside the EU entirely, that "money deposited" is counted as a loss for other subsidiaries inside the EU and paid as "licensing fees" to Apple Ireland.
It kind of is true, perhaps not to the letter, but certainly in principle. As someone not familiar with the nuances of tax legislation as I'd bet a lot of us are, you can chase terminology all day, but ultimately it all boils down to Ireland given Apple discounted access to the European market at a knockdown rate. The specific point at issue, is not the discount though, it's the fact that this discount isn't available to others.
Nope, has nothing to do with market access. Ireland's tax discount was an incentive for Apple to base their IP there and deposit it's after tax earnings, i.e. foreign earnings after paying corporate income taxes to France, Germany, etc, etc.
Apple paid all the taxes it needed for "market access", this is just a question of what they do with the remaining profits after they paid those taxes. And where they base their IP, which obviously isn't going to be France or Germany.
Yes the reasoning being that they “pay those in the USA” or otherwise they would be paying them in Europe. Now whether or not they actually pay them in the US is another matter but, the manner in which it was determined which taxes should and should not be deferrable is what is at issue.
Since Apple has driven up wages in all of it's markets, you mean they conspired to increase taxes paid by it's employees and it's competitors employees.
In this particular case it was a breach of EU state aid rules, Ireland's Government has been very much opposed to the decision, which is why comparisons to the IRS don't really work all that nicely. From a legal perspective it's really more a question of competition law than tax.