First Look

Will Ireland agree that Apple owes it billions of euros?

Ireland's ruling party wants to appeal the European Commission's decision. But it relies on support from independent lawmakers that may not agree on the appeal.

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    A man looks at his phone as he walks past an authorized apple reseller store in Galway, Ireland, on Aug. 30, 2016. The European Union has ruled that Apple owes billions in back taxes to Ireland.
    Clodagh Kilcoyne/Reuters
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Apple owes Ireland a windfall in back taxes, according to a Tuesday ruling by the European Commission. But Ireland may not want it.

The Commission found that the terms of two deals struck between Ireland and Apple, under which the software giant would pay almost no taxes to the European bloc for more than a decade, violated EU tax rules, and ordered Apple to pay Ireland almost $15 billion in unpaid taxes.

On Tuesday, Irish finance minister Michael Noonan said that he "disagreed profoundly" with the Commission's order.

"It is important that we send a strong message that Ireland remains an attractive and stable location of choice for long-term substantive investment," he said, according to the Associated Press. "Apple has been in Ireland since the 1980s and employs thousands of people in Cork."

Apple chief executive officer Tim Cook protested against the order in a statement. "We now find ourselves in the unusual position of being ordered to retroactively pay additional taxes to a government that says we don't owe them any more than we've already paid," he said, according to the AP.

The ruling sets up a precarious political situation in Ireland. Mr. Noonan says that he intends to challenge the ruling in Europe's highest court, a process that promises to drag out for at least two years.

The government, led by Noonan's center-right Fine Gael party, relies on the support of independent lawmakers to pass legislation. A group of those independents, the Independent Alliance, said on Wednesday that they would not back an appeal of the Commission's ruling, a move that could lead to a fracturing of tenuous inter-party accords that would keep the ruling Fine Gael from being able to pass legislation.

The White House and US Treasury Department also criticized the ruling, saying American taxpayers could be hurt by retroactive impositions of European taxes, since US companies are eligible for tax credits for taxes paid abroad. And the Obama administration recently protested to EU officials that investigations into illegal tax deals seemed especially targeted at US companies. 

Ireland's 12.5 percent corporate tax rate is among the lowest in the EU, noted The Christian Science Monitor on Tuesday. The strategy has helped it draw multinationals like Apple, which employs some 5,500 people in the city of Cork. Apple's debt is a virtual drop in the bucket for a company that reported more than $53 billion in profit last fiscal year. But the cash would be quite meaningful for a country with a population of less than 4.6 million, or more than $3,000 per capita.

Matthew Gardner, executive director of the Institute on Taxation and Economic Policy, a US public policy nonprofit, told the AP that the Commission's ruling showed it understood that "when member nations act as tax havens, as Ireland has, there are casualties far beyond the borders of Ireland."

"It's not a good economic development strategy for Ireland in the long run, and it also subverts the tax system of every other member nation and nations around world," he said.

This report contains material from Reuters and the Associated Press.

 
 
 

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