Ireland will appeal the European Commission’s ruling to collect €13 billion in taxes from Apple, the Irish Department of Finance has announced on Monday.
The Irish countermove comes nearly four months after the European Commission declared tax arrangements between Apple and Ireland — originally established in 1991 — had allowed the company to pay “substantially less tax” than rival companies, and were therefore illegal under state aid rules.
Following a two-year investigation, the commission found that Ireland charges Apple only for on-the-ground sales and that already low European tax rates have been further lowered through the use of shell companies.
Specifically, the European Competition Commissioner Margrethe Vestager, who was a former Danish economy affairs minister, 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.
This has allowed the tech giant to pay billions of euros less than would otherwise have been the case, at one point paying a tax rate of just 0.005 percent, the commissioner stated in August.
In a formal legal submission, the Irish Department of Finance claims that it’s not only legal to levy far less tax on profits imposed by competitors, but also that it’s the whole point of Ireland’s sales pitch to foreign investors.
The department is accusing the European Commission of unfairness, incompetence, overstepping its authority, and interfering with Ireland’s sovereignty in national tax affairs.
It said Vestager should have confined herself to policing illegal state aid that gives an unfair advantage to one particular company, instead of launching an assault on a policy that Ireland has offered to all foreign companies operating onshore.
“The purpose of the state aid rules is to tackle state interventions which confer a selective advantage. The state aid rules by their nature cannot remedy mismatches between tax systems on a global level,” the Irish government stated in its legal arguments published on Monday.
“Ireland did not give favourable tax treatment to Apple. The full amount of tax was paid in this case and no state aid was provided. Ireland does not do deals with taxpayers.”
The European Commission is expected to publish a redacted version of its decision as early as this week.
The global tax regime has been getting tougher, with the Organisation for Economic Co-operation and Development (OECD) working with more than 100 countries to stamp out tax avoidance. The OECD expects governments to be able to retrieve as much as $240 billion in lost revenue each year through dodgy tax practices across the globe, which it claims represents up to 10 percent of global corporate income tax revenues.
In Australia, Apple was found to have increased the amount of tax it paid for the 2014-15 financial year over the year prior, after being audited by the ATO for tax avoidance alongside Google and Microsoft.