On October 4, 2016 on the website of the Irish Department of Finance the Opening Statement, by the Irish Minister for Finance to the Seanad (Senate), on the European Commission’s decision that Ireland provided unlawful State aid to Apple was published. Below we will publish the full text that was made available on the website of the Irish Department of Finance.
“4 October 2016
Opening Statement by the Minister for Finance, Michael Noonan, TD
Introduction
I am grateful for the invitation to attend this evening to speak here in the Upper House on such an important issue.
At the end of August 2016, the European Commission announced it had reached a negative Decision in the Apple State Aid investigation.
It is important to clarify that no other companies are subject to this decision by the European Commission and there are no other impending State aid cases against Ireland. As Commission Vestager has stated clearly: “this decision does not call into question Ireland's general tax system or its corporate tax rate”.
The Government profoundly disagrees with the Commission's analysis in the Apple investigation and will challenge the decision before the European Courts. Our position throughout this process has been that the full amount of tax was paid in Ireland and no State aid was provided. Ireland did not give favourable tax treatment to Apple. Ireland does not do deals with taxpayers.
In September, Dáil Éireann passed a motion supporting the Government's decision to appeal the European Commission's decision.
Investigation
The European Commission first wrote to Ireland in June 2013 asking for information on the practice of tax rulings in Ireland. In particular, they requested information on any rulings granted in favour of Apple.
The Commission later formalised the process when they publically announced a full investigation into the dealings between the State and Apple in June 2014, giving their preliminary view that there was a State Aid.
Ireland cooperated fully with the Commission’s inquiries. Over the course of the three year investigation, detailed and comprehensive responses were provided to the Commission demonstrating that:
· the appropriate amount of Irish tax was charged
· no selective advantage was given and
· there was no State Aid.
Commission’s Decision
In August 2016, the Commission made public certain details of their Decision in a detailed press release.
The Commission has yet to publish the Final Decision, which is a technical and detailed legal document that has been addressed to the State.
Both Ireland and Apple are being given an opportunity to identify material within the decision which is subject to commercial confidentiality, and which must therefore be redacted. Ireland is offering every assistance to the Commission under this process. However, it must be noted that the company also has the opportunity to exercise its rights in the matter.
This procedure mirrors that which was used for the cases against the Netherlands, Belgium and Luxembourg, where it took several months for the Commission to make a copy of the decisions publically available. This approach is also consistent with the process that was followed for the Commission’s opening decision in the Apple case in 2014.
In order to be as transparent as possible and to allow for the appropriate public debate on the issue, I asked my Department to make an explanatory memorandum on the case available. This was published on my Department’s website.
Appeal
In September the Government authorised me to appeal the Commission decision to the European Courts. This is necessary:
· to defend the integrity of our tax system;
· to provide tax certainty to business; and
· to challenge the encroachment of EU state aid rules into the sovereign Member State competence of taxation.
Given that we are now facing an important Court process in which Ireland will articulate a robust challenge to the Commission’s position, I am mindful of the need to avoid cutting across Ireland’s legal case in my contribution here today. That said, I feel it is important for this debate that I outline, in high-level terms, what I believe are the key persuasive arguments for taking an appeal.
First, it is simply untrue that Ireland provided favourable treatment to Apple. The Chairman of the Revenue Commissioners has stated emphatically that:
· there was no departure from the applicable Irish tax law by Revenue;
· there was no preference shown in applying that law; and
· the full tax due was paid in accordance with the law.
It is very damaging for our reputation to be called into question. This affects how Ireland could be treated by other jurisdictions and damages Ireland’s credibility in the international tax debate and inhibits Ireland in pressing arguments that serve our national interest.
A further concern is that the Commission is undermining the fundamental principle of international tax: that tax should be paid where the value is created. Everyone knows that the iPhone and other well-known Apple products were developed in the US, not Ireland. Pascal Saint-Amans from the OECD made this very point when he visited Dublin last week.
A central aspect of this case is that the companies concerned were not tax resident in Ireland. And under Irish tax law, non-resident companies are chargeable to Irish corporation tax only on the profits attributable to their Irish branches.
This means that profits of such companies that are not generated by their Irish branches cannot be charged with Irish tax under Irish tax law. Examples include profits from technology, design and marketing that are generated outside Ireland.
The US Treasury has expressed a concern that in such cases the recovery sum could be creditable against a company’s US tax bill. If so, the company’s U.S. tax liability would be reduced dollar for dollar by these recoveries in the event that their offshore earnings are repatriated or treated as repatriated as part of possible U.S. tax reform.
This would effectively constitute a transfer of revenue to the EU from the U.S. government and its taxpayers. The US Treasury has described this outcome as ‘deeply troubling’.
The European Commission has stated that the sums to be recovered by Ireland would be reduced if other countries were to require Apple to pay more taxes or if the US authorities were to require Apple to pay larger amounts of money to their US parent company.
This points to a clear contradiction at the heart of the European Commission’s decision. While requiring Ireland to recover the tax sums, the Commission is also acknowledging that the sums may in fact be taxable in other jurisdictions.
Taxation is a core Member State competence, which is enshrined in the EU Treaties. This decision encroaches on Member State sovereignty in the area of tax, by extending competition rules into the tax area to an unprecedented and unjustified extent. By doing this the Commission creates uncertainty for business and investment in the European economy, both in its novel interpretation of longstanding rules and their unfair retroactive application.
It is important to emphasise that the bringing of appeal proceedings is not in any way an endorsement of aggressive tax planning arrangements, nor is it a defence of the extremely low effective tax rates that can be achieved under the broken international tax system.
The reaction to the European Commission’s decision has, at times, painted an outdated and unfair caricature of Ireland’s position on tax that is at odds with the evidence and overlooks our proven track record in recent years. The facts show our constructive engagement at the international table, with early implementation of reforms ahead of many of our partner countries.
Despite the Decision, Ireland remains committed to international efforts to reform international tax rules to ensure the correct tax is paid by multinationals in the correct place. Our view remains that it is important that this is done in the appropriate way – moving forward in tandem with other countries on the basis of a global consensus.
Recovery
On foot of the Commission's decision, Ireland is required to recover up to €13bn of alleged state aid from the company covering a ten year period. Notwithstanding the right of appeal, Ireland is legally obliged to recover the alleged state aid from Apple in the interim. This may be placed in a ring-fenced escrow account pending the outcome of legal proceedings.
Some of the public debate on the case has focused on an attitude of ‘take the money and run’.
The Government disagrees with that position.
The European Commission has stated that the sums to be recovered by Ireland would be reduced if other countries were to require Apple to pay more taxes or if the US authorities were to require Apple to pay larger amounts of money to their US parent company.
This means that the final figure is by no means certain and may be the subject of complex, drawn-out engagement with other countries for many years to come.
I should be clear that the Irish position all along has been that we have no right to this money based on Irish tax law. Therefore, the ultimate entitlement of Ireland to this tax revenue in the face of competing claims from other jurisdictions is highly uncertain.
Furthermore, the figures remain subject to legal proceedings by Apple. Regardless of any Irish appeal, if Apple were to be successful in their appeal the full amount would have to be repaid to the company.
Conclusion
In conclusion, the Government is of the view that there was no breach of State Aid rules in this case and that the legislative provisions were correctly applied.
By appealing the Decision the Government is taking the necessary course of action to vigorously defend the Irish position.
Ireland has done nothing wrong here. We have a proven track record in international tax reform and a strong commitment to meeting the best international standards.
I look forward to listening to Senators’ statements on this important issue this evening.”
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