€13 Billion Tax Bill

Ireland’s Finance Minister, Paschal Donohue, has said that the EU’s demand that they collect €13 billion in taxes is unjustified. Apple owes the money, who have used Ireland as a financial base due to its liberal tax system.

The European Commission ordered Apple to repay taxes after it was ruled that the US company paid so little tax that it amounts to state aid from the Irish government.

The Irish government has said that it will collect the money, pending a court appeal from Apple. Speaking on the issue, Minister Donohue said: “We are not the global tax collector for everybody else.”

The European competition enforcer said that Apple’s illegal deals with the Irish government resulted in their European business avoiding tax payments. In effect, this allowed the company to funnel funds through Ireland. Apple opened a shell companyin Ireland with no employees, no office, and no real function.  As a result, during 2014, Apple only paid €50 for every €1 million it made.

The EU demanded that Ireland collect the money owed by Apple for the past 10 years. This amounts to about €13 billion.

Tax Haven

Ireland has been branded as one of the worlds worst tax havens. A report carried out by the charity Oxfam, found that Ireland was placed sixth in a list of 15 countries that facilitated large-scale tax avoidance. The Irish State has facilitated the measures used by companies to avoid paying tax. These include profit-shifting, aggressive tax planning structures, and sweetheart deals.

The country has been accused of facilitating a ‘race to the bottom’. It has slashed its corporate tax rate in an effort to attract foreign investment.

The United States has taken a dim view of this activity. In setting up an office in Ireland for tax reasons, they have managed to avoid an estimated $66 billion to the US government. However, US tax law is partly at fault for this situation. The American tax code allows for so-called deferrals. This allows them to defer paying taxes on revenue generated outside of the United States. Apple alone is estimated to have deferred $215 billion.

Government Strategy

Ireland has been keen to preserve its international reputation for being open for business. In the wake of the financial crash of 2008, the Irish economy went into freefall. Based largely on the property market, when the financial crash hit, construction and property development collapsed. As a result, the Irish government has attempted to market itself as the best small country in which to do business. This involves offering rock-bottom corporate tax rates to promote investment.

The Irish government is determined not to fall out of favour of multinational companies such as Apple. Therefore, they are very hesitant about collecting a tax bill worth €13 billion, roughly the same amount as the government spends annually on health. In the context of Brexit, they are attempting to attract even more multinationals to Irish shores.

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