The reluctant windfall
1 October 2014 | 0
Apple and the Irish government had the dubious honour of having their tax dealings thrust into the spotlight on 30 September when the European Commission announced it was investigating whether the company may have been in receipt of ‘unlawful aid’.
A 21-page document from the Commission outlined the reasons why it had decided to open a probe into Apple’s tax affairs in June after a year-long preliminary investigation.
I have no intention to go into the minutiae of the investigation which centres on tax rulings by the Irish government on profit allocation between two Apple subsidiaries in Ireland in 1991 and 2007.
While it might be a source of embarrassment for the Irish government to have its tax regime held up to inspection, the good news is that all that unlawful aid may have to be paid back and, according to TechCentral’s report, it “could be worth billions of euros”.
In these straitened times, I’m sure there are many in Ireland who would be only too happy for the government to receive a multi-billion euro windfall. When our present government is under pressure to make €2 billion worth of savings in its next budget, lots of ordinary people would cheer if a cheque from Apple could magically make that requirement disappear. In fact, the only people I can think of who would be unhappy at the prospect of a cheque for billions of euros made out to ‘Government of Ireland’ by Apple would be Apple and the Government of Ireland.
The government is already doing its best to ensure Ireland plc doesn’t get a cent of the money that could be owed to it, vigorously defending its tax arrangements with Apple and expressing its confidence “that there is no breach of state aid rules in this case”. It has already responded to the Commission, “addressing in detail the concerns and some misunderstandings contained in the opening decision”.
Apple “did not receive selective treatment and was taxed fully in accordance with the law”, the government added.
Coming out swinging
For its part, Apple has refuted the suggestion it benefited from selective treatment from Irish officials over the years. “We’re subject to the same tax laws as the countless other companies who do business in Ireland,” the company said in a statement.
I don’t know about you, but my immediate reaction to this announcement was very positive. I started to think of all those billions Ireland owes for the bailout and it occurred to me that if Apple’s tax arrangements are no different from “countless other companies who do business in Ireland” then, assuming the European Commission proves its charge of unlawful aid, many other businesses will be forced to return their unlawful aid and the country will be in for a huge windfall that would go a long way to clearing its debts.
Admittedly, those companies affected might feel peeved at having to pay back all that money but even if they all decide to leave the country overnight, Ireland will have had many years of investment and employment out of them and still be left sitting on a huge pile of cash. It might also encourage some of those companies to look more clearly at what advantages they get from being based in Ireland outside of its very generous tax regime.
Ireland keeps talking about the value of its young, educated workforce, its expertise in ICT, world class research institutes and third level institutions, and its membership of the EU as significant reasons for any business to invest there. The problem is that none of Ireland’s politicians or advocates are confident enough to argue the country’s case without being compelled to fall back on its low tax regime. They don’t have the self-assurance to promote their country’s major virtues without throwing in the monetary incentive of low taxation.
If the Commission proves its case against Apple, the floodgates could open for similar rulings against other multinationals. The irony is that the EC could force Ireland’s politicians and advocates to make a proper and passionate argument for investing in the country instead of the lazy option of bribing them to come here.