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Apple appeal is "weak, shows poor political judgement and is likely to fail” – Carthy

19 December, 2016 - by Matt Carthy MEP

Sinn Féin MEP Matt Carthy has said the Irish government’s appeal against the European Commission’s state aid ruling on Apple “is weak, shows poor political judgement and likely to fail”.

Carthy, a member of the European Parliament’s Economic and Monetary Affairs committee and Panama Papers inquiry said:

“The Irish government’s arguments don’t stand up to scrutiny. The Department of Finance chooses to ignore the economic reality that the structures put in place by Apple and sanctioned by Revenue facilitated industrial-scale tax avoidance.

“The government argues that, technically, the comfort letters issued by Revenue were in accordance with Irish law on where profits of a branch can be taxed, and that Apple received neither special treatment nor an advantage.

“The substance of these Revenue opinions was that the agency agreed to Apple’s proposal to establish an artificial structure that allowed it to attribute the vast majority of its profits to an imaginary and untaxable head office that was resident nowhere.

"The state aid ruling showed that these ‘head offices’ existed only on paper and could not possibly have generated such profits.  The result of the arrangement was that Apple paid as little tax as 0.005% – or €50 for each million in profits – in 2014.

“Apple Inc is a separate legal entity from ASI and AOE, and the deals in question, sealed by Revenue, were between the resident and non-resident branches of ASI and AOE.  The Commission correctly found that the only profit that could truly be attributed to the non-resident entity was that of interest as it had no employees or premises.  If the non-resident branch of ASI is a non-entity then that means those profits must be attributed to the Irish branch.”

Carthy continued:

“The government’s arguments on the arms-length principle are similarly weak.  It seems to be arguing that the Irish state has been exempt from applying the arms-length principle in transfer pricing by multinational corporations. While the principle wasn’t formally enshrined into Irish law until 2010, it has existed since the time of the League of Nations and the modern guidelines were formalised by the OECD in 1979.

“As the Irish government said in a paper accompanying the Finance Bill in 2010, ‘All member countries of the OECD, including Ireland, accept this principle’. It has long been a feature of Irish tax treaties and case law, and it was also found long before 2010 in the Taxes Consolidation Act 1997 (s1036).

“The crux of the matter is that there was selective advantage conferred on Apple by Revenue’s sweetheart deals, and nothing in the government’s appeal summary comes close to challenging this finding. The chances of the government winning this appeal are slim to nil, but it will cost taxpayers millions of euro and further damage our international reputation on tax justice.

“The appeal closely echoes the arguments made by the US Treasury in its white paper in August. Surely the government's lawyers have advised it of how unlikely an appeal is to succeed – the motivation in opposing the finding is clearly political and is intended to send a comfort message to tax-avoiding multinationals that the Irish government will have their backs.

“Just last week Oxfam labelled the Irish state as the sixth worst corporate tax haven in the world, in part due to sweetheart deals and other selective incentives provided to some multinationals. In siding with one of the wealthiest corporations in the world in appealing this ruling, the Irish government is sending a signal that it thinks massive and unfair tax avoidance by multinationals is legitimate.”

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