This morning the European Court of Justice has set aside a 2020 decision which ruled in favour of Apple and the Irish State in relation to tax policy. This means that Apple will have to pay the more than €13 billion in tax which the Commission had estimated was owed to the Irish revenue.
Even though the state stands to benefit immediately, the state had supported Apple in its appeal against the judgement. Minister Jack Chambers is to brief the Cabinet on the decision.
The appeal by Apple and the state had its origins in the 2016 decision by the European Commission, following an extensive inquiry, which found that Apple had avoided paying €13.1 billion in tax, and a further $1.2 billion in interest.
The Commission claimed that Apple had paid an effective rate of just 1% on its profits within the EU in 2003, and that this had fallen to 0.005% by 2014 when the effective corporation tax rate here was 12.5%. The money that the EU estimated to be due, adjusted to $12.7 billion, has been in escrow awaiting the judgement.
All of Apple’s business outside of the United States was being channelled through its Irish offices. However, the report found that Apple Operations Europe and Apple Sales International which were based in Ireland “existed only on paper and could not have generated such profits.”
To all intents and purposes the Commission ruled that the Irish state was providing what was effectively a tax haven for Apple. The Court of Justice has upheld that decision.
Of course Apple does employ people in the state and its Cork base is the largest Apple facility in Europe. Apple currently claims to employ over 6,000 people here. When the judgement was made in 2016 and fears were being expressed over the likely impact of any decision on Apple it then employed 5,500.
It said at the time that it planned to take on around another 1,000 over the following 12 months. If the numbers of employees given by the company now is accurate then somewhere in the region of 1,000 jobs have been created here.
Since then, Apple has been issued with 512 work permits for persons from outside of the EU and EEA. The company says that it employs people from 90 different countries here so along with the number of people coming to work here from within the EU who do not require work permits it is clear that the majority of the jobs created have gone to other than Irish people.
Apple has expressed disappointment with the decision and it will be greeted with disappointment by the Irish government. Given the pressure that it and other corporations based in the United States are under from that quarter, it will be interesting to see what the impact of this morning’s decision amounts to.
It focuses again on the relationship which the Irish state has with Apple and the corporations which are not only availing of good tax conditions, but which have also been adjudged to be using the Irish system as a means to avoid paying tax on profits generated in other countries.
On top of that is the question of the costs v benefits of corporations based in Ireland who are recruiting predominantly from outside of the state. The benefits of income and corporation tax must be balanced against the costs in terms of demand on housing and other provisions. It is a debate that this morning’s decision may now open up.