I assume offering deals like that runs afoul of international trade agreements.
Europe claims that Ireland's tax law is EU-illegal, and thus Ireland must retroactively enforce an EU-legal tax law, and thus the back taxes.
I certainly agree with you about Ireland and Apple's motivations.
"it gives Apple a significant advantage over other businesses that are subject to the same national taxation rules"
and
"On this basis, the Commission concluded that the tax rulings issued by Ireland endorsed an artificial allocation of Apple Sales International and Apple Operations Europe's sales profits to their "head offices", where they were not taxed. As a result, the tax rulings enabled Apple to pay substantially less tax than other companies, which is illegal under EU state aid rules. This decision does not call into question Ireland's general tax system or its corporate tax rate."
I think if you read the actual claim they make, and then you go read the description of the Double Irish accounting trick on wikipedia, you'll notice that to the untrained eye (such as mine), there's nothing special about the deal that Apple is getting; we are publicly aware of dozens of transnationals that get that deal, and there are probably hundreds or thousands.
The EU's claim, I think, is not that the deal is special in its entirety, but that Ireland's ruling on the exact fiddly details of how profits are allocated to different Apple subsidiaries is, uh, irregular. It's a pretty technical accounting point.
e.g. the following assertion, from Vestager, some months ago: "This is not about transfer pricing, it is about allocation of profits so it is different to the decisions on Starbucks and Fiat".
http://arstechnica.co.uk/tech-policy/2016/08/apple-must-pay-...
Ireland applied 13.5% tax on a certain percentage of the profits, those declared in Ireland at the time, but did not apply it to all the profits. Although the book-keeping was done in an Irish company the sales where not all in Ireland. At the time Ireland sought clarification from the EU on how the tax should be applied, and were told they could only tax the profits generated in Ireland. Now, after discovering there is a sum of money in off-shore accounts that had not had the tax deducted, they have told Ireland to retrospectively apply the 13% tax on all profits unless another EU country could claim the profits were generated there.
So the original ruling was to use Ireland as a tax collector that the rest of Europe could then ask for the taxes they were due.
It seems that the Irish gov are seeking to overturn the original ruling as, according to the original information sought at the time, they were not doing anything illegal. In hindsight the accounting irregularity, refereed to as the double Irish, meant that Apple could accumulate these profits. The main issue is that these monies have not been declared in any EU country, so now because of the EU's ruling Trump has decided it belongs to America because American companies should only declare profits in America :D
http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A5...
It seems the main argument seems to be that the tax ruling from Ireland to Apple was not based on objective criteria but more of a negotiation like "we'll give you 1000 of jobs if you give us a discount". It seems reasonable to me to treat every ruling on that basis as "special treatment", even if they are commonly given.
To quote: -------------------- The Commission notes, in the first place, that the taxable basis in the 1991 ruling was negotiated rather than substantiated by reference to comparable transactions. Moreover, according to the excerpt reproduced at recital (37), the authorities did not seem to have had the intention of establishing a profit allocation based on transfer pricing. Instead, according to that excerpt, Irish Revenue accepted the calculation of profit attributable to the branch of AOE on the basis of actual costs without this choice being reasoned in any way. The fact that the methods used to determine profit allocation to ASI and AOE result from a negotiation rather than a pricing methodology, reinforces the idea that the outcome of the agreed method is not arm’s length and that a prudent independent market operator would not have accepted the remuneration allocated to the branches of ASI and AOE in the same situation, which serve as a basis for calculating the tax liability. -------------------
They then go on to mention many irregularities with the ruling which seem to be reverse-engineered to get a desired tax basis, instead of based on the economic reality.
Apple doesn't actually employ the double Irish as traditionally defined - the second half of the double Irish arrangement involves transferring profits to a company outside of Ireland (typically in a Caribbean tax haven). Apple doesn't do this. Their overseas profits remain in their Irish subsidiary, where they have a very low tax rate (which is what is being challenged by the EU).
I think, ironically, that if Apple had fully implemented the double Irish arrangement (like many other multinational companies), the EU commission would not be able to go after Apple using this "favorable treatment" line of inquiry.
Yes, the claim is that it is "irregular" in the sense that Apple got it and other companies may not get it. That's the special deal.
Whether or not the EC is right is for the court to decide. But the fact that the ruling is on the question of a special deal means that it cannot at the same time be a ruling on the compliance of Irish law with EU law.
There is also the concern of how 13B Euros of Apple will-be/have-been seized/escrowed for the duration of the case which may takes years. In case EC loses, will EC/EU pay to Apple for temporary loss of their property ?
The Commission, in simple terms, makes sure that a single market doesn't mean that one country helps companies avoid tax in other countries while still allowing completely free trade.
Ireland agreed to obey EU rules when joining.
Ireland was not following the laws
Yes, like all the other rulings regarding the Article 107, the infractor is the state giving illegal aids.
And the companies are "dragged" because they were given an illegal advantage over others companies and that advantage should be voided
Because if Ireland "loses", then Apple owes 14B Euro. So, Apple is an interested party.
Nothing about this has anything directly to do with Apple. The real question is which of Ireland laws 'win'.
[1] http://www.nytimes.com/2012/04/29/business/apples-tax-strate...
[2] http://www.businessinsider.de/how-apple-managed-to-get-its-t...
"It's illegal for a government in the EU to strike a so-called "sweetheart deal" with a company. The European Commission classes those deals as illegal state aid, and it has decided that Ireland's deal with Apple is exactly that."
So it seems it's not typical "double Irish" or does the EU simply go after the biggest offender?
The EU has a fixed set of "competencies", i.e. areas of law it controls. Taxation is very very explicitly not one of them. Member states did not ever sign up to letting the EU Commission control their local tax rates.
The EU is now trying to work around the treaty-defined limits on its own power by redefining low tax rates as "aid". Beyond the Orwellian doublethink required to define taxation as aid, this is a problem because if it's allowed to define tax rates France and Germany don't like as "state aid" then the EU has effectively increased its own powers far beyond what the treaties were written to allow, without any kind of democratic process or even consent of the national leaders.
"Save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market."
Taxation is explicitly mentioned in the text as a form of subsidy, hence the EU does not overreach when it tries to enforce the regulations that the member states have agreed upon. It is of course debatable when a taxation is too low, but an effective tax rate of 0.005 percent provides enough evidence of a hidden subsidy to justify the punishment (IMHO).
Perhaps this counts:
3. The following may be considered to be compatible with the internal market: aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment ... aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest;
Or perhaps it doesn't, given that this is stated as "may be incompatible" not "shall be incompatible".
Though I did get a laugh out of the explicit exception for Germany that can only be removed if the Commission allows.
Like I said - as written this text could be seen as forbidding even very basic things like VAT, as it doesn't apply to all types of goods or applies at different rates and thus "favours certain undertakings".
I did not say Ireland needs to follow EU laws if it leaves the EU, but that isn't relevant.
Retric > Ireland also has a law on the books saying it must comply with the EU.
akvadrako > Ireland has to follow EU laws because the EU says so
Retric > No, Ireland ... has to follow EU laws because Ireland law says so
My (modest) understanding of treaty law is that Retric is right, that the laws that require Ireland to obey EU rulings are Irish laws. In particular, presumably some members of various executive branches negotiated some treaties, and then asked their respective legislative branches to "ratify" those treaties, i.e. pass laws binding the signatories to obey the treaties, by their own respective legal systems.
My non-lawyer understanding is that EU legal theory recognizes the sovereignty of nations, and the EU's authority is derived from the sovereign authority of nations.
Do you actually disagree with any of this? If you do disagree, how do you understand international law to work? i.e. why would Ireland ever care what EU law says, other than via the legal chain I just outlined?