An expensive victory

At first glance, the ruling by the General Court of the European Union seems like an overwhelming victory for the Irish government and Apple against the European Commission in the infamous €13bn euro tax case. The Commission had ordered Apple to pay the amount in alleged unpaid taxes to the Irish government, arguing the massive sum was owed because the Irish government had given a form of state aid to Apple by agreeing deals in 1991 and 2007 that enabled the tech giant to effectively pay minuscule rates of tax.

The General Court stated that the Commission was wrong to declare Apple’s Irish subsidiaries “had been granted a selective economic advantage and, by extension, State Aid.” It added that the Commission “did not prove, in its alternative line of reasoning, that the contested tax rulings were the result of discretion exercised by the Irish tax authorities and that, accordingly, [Apple’s subsidiaries] ASI and AOE had been granted a selective advantage.”

The Irish government said the judgement vindicated Ireland, stating it had “always been clear that, based on Irish law, the correct amount of Irish tax was charged and that Ireland provided no State aid to Apple.” The Department of Finance added that the judgement demonstrated there had been “no special treatment” for Apple.

Case closed and the Irish people can all celebrate the glorious victory their government secured for them in ensuring they didn’t get a sniff of the €13bn.

But is it really that simple? The General Court’s decision rested on the premise that the Irish government, in allowing Apple to pay well below the 12.5% corporation tax that most indigenous companies had to pay, had not given the tech giant selective treatment. As RTE’s Europe Editor Tony Connelly noted back in September 2016: “The task facing the Irish Government is to prove that the deal allegedly allowing Apple to avoid tax to the tune of €13bn was NOT something which only favoured Apple as a company, or favoured the way it does business, to the detriment of other companies.”

But if the Irish government won the argument by proving the agreements with Apple struck in 1991 and 2007 did not amount to selective treatment, doesn’t that mean other multinationals must have been able to avail of similar deals? Logically, you would assume that for something to not be “selective”, it needs to have been more widely available than to a single company.

If that was the case, then obviously the Irish government wasn’t engaging in a form of illegal State aid but, equally obviously, it was declining to collect an even larger potential amount of tax by allowing businesses to strike similar deals to those it agreed with Apple in 1991 and 2007. Which means that the Irish government, on behalf of its citizens, has waived extraordinary sums of tax from multinationals that could have been available if they had paid their taxes in line with the existing 12.5% corporation tax rate. It hardly rates a mention that those deals were designed to enable large multinationals to avoid paying one of – if not the lowest – corporation tax rates in the EU.

It’s true that the General Court’s judgement represents a “victory” for Apple and the Irish government. But it also highlights a much more enduring defeat for the Irish people at the hands of their leaders. The Irish people may well have agreed to a strategy of attracting investment and jobs from multinationals by offering them the lowest corporation tax rate in the EU, but how many of them voted for corporations to be quietly given even lower rates than that?

We will never know how much extra tax revenue the country would have gained in the past 30 years or so if the multinationals had paid the corporation tax rate of 12.5%. But what we do know is that the Irish people were never asked if they agreed to give up that revenue. So yes, it’s a victory for the government and the multinationals that billions of euros will not be collected in taxes, but spare a thought for the Irish people and for the good those taxes could have done to finance the services that underpin the social fabric of the country.