European Commission on the brink of legal action against Ireland over Apple’s #StateAid

 

Financial and other media sources (FT; Bloomberg; RTE et al) are awash with speculation that the Republic of Ireland may be taken to the European Court of Justice by the European Commission for its failure to implement the Commission’s order of August 2016 to recover €13bn of undue tax benefits granted by Ireland to Apple.

Speaking at the time of the decision, Competition Commissioner Margrethe Vestager said:

“Member States cannot give tax benefits to selected companies – this is illegal under EU state aid rules. The Commission’s investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years. In fact, this selective treatment allowed Apple to pay an effective corporate tax rate of 1 per cent on its European profits in 2003 down to 0.005 per cent in 2014.”

Both Ireland and Apple are pursuing appeals against the Commission’s decision through the European Court of Justice, but a final appeal ruling may be as many as five years away.

Crucially, the fact that an appeal is underway, does not obviate a Member State’s obligation to recover the State Aid in question pending a final resolution of the case before the Courts.  The perception that Ireland, which vehemently disagreed with the Commission’s decision, has been foot dragging is causing increasing anger and frustration in Brussels.

A senior European Commission official speaking anonymously to the FT said; “The question is whether the action by Dublin is deemed sufficiently advanced, sufficiently real if you like, to give reassurance that they’re getting on with it. It a question of judgment”.

road sign European Court of JusticeShould the European Commission decide to issue a non-compliance notice to Ireland, a decision that could come as soon as later this week, then it will be a significant blow to the Irish Government which has been vocal in its insistence that it is keeping the Commission fully apprised of its efforts to achieve recovery of the €13bn due without delay.

The case is given added impetus as Fiat repaid tax to Luxembourg in a similar State Aid case within four months, and Starbucks took nine months to repay its State Aid to the Netherlands.  Ireland’s delay in recovery may be partly down due on-going negotiations over the details of an escrow account to hold Apple’s repayments while the appeal against the Commission’s State Aid decision winds its way through the European Union’s judicial machinery, but Ireland’s deadline to collect Apple’s billions expired in January 2017 and little progress has been evident since then.

With major decisions due in coming weeks on selective tax advantage cases involving both Amazon.com and McDonald’s and it’s recent €2.4bn fine levied against Google, DG-Competition under Commissioner Vestager shows little prospect of shying away from punitive actions against some of the globe’s best known brands where it judges that the integrity and competitiveness of the EU’s Internal Market has been compromised.

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