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A Shamrock Victory: Apple And Avoiding Tax In Ireland

The corporate spin machine was working with typical aggression. “This case was not about how much tax we pay,” claimed Apple in a statement. “We’re proud to be the largest taxpayer in the world, as we know the important role tax payments play in society.”

These remarks were made in light of a decision by the European Union’s General Court that was supported by the tax collector in question, namely, the Irish state. In what could only be seen as strikingly unusual, the tax department was being told that they would not be able to get the 13 billion euros supposedly owed to them by the tech behemoth. The Irish government delighted in stating that, “The correct amount of Irish tax was charged… in line with normal Irish taxation rules.” Had the Irish government lost the case, with its revenue collectors shown to be in breach, its penalty, in cutely perverse fashion, would have been the award of 13 billion euros.

The General Court’s finding annulled the Commission for Competition’s August 2016 decision which found that Apple had been granted illegal state aid by the Revenue Commissioners’ decisions to reduce its tax rate to 0.005 percent. Apple Sales International (ASI) and Apple Operations Europe (AOE) had been established as shell companies which generated between 1997 and 2007 104 million euros in profits, paying infinitesimally small amounts of tax.

The General Court found the Commission’s ruling that ASI and AOE had been advantaged by the Irish tax authorities in decisions made in 1991 and 2007 incorrect. The Commission “should have shown that the income represented the value of the activities actually carried out by the Irish branches themselves, in view of, inter alia, the activities and functions actually performed by the Irish branches of ASI and AOE, on the one hand, and the strategic decisions taken and implemented outside of those branches, on the other.” One problem lay in the fact that the profits gained by the two subsidiaries were attributable, internally, to a “head office” that only ever existed on paper.

To this legal casuistry typical in the domain of tax avoidance and the use of shell companies, the General Court also suggested that the Commission had failed to discharge the burden of showing how methodological errors in the tax rulings “led to a reduction in ASI and AOE’s chargeable profits in Ireland.” Despite conceding that those rulings were “incomplete and occasionally inconsistent”, the defects were insufficient “to prove the existence of an advantage”.

All in all, the sentiment was that of a job well done for wily tax dodgers in a country that has, over the years, become a tax haven oasis within the EU internal market. Brian Keegan, Director of Public Policy at Chartered Accountants Ireland, did his bit to suggest that the Irish approach to assessing Apple’s tax bill was appropriate, showing that the system worked. “The Commission had not challenged Ireland’s tax laws but rather how they were applied. The outcome vindicates Ireland’s adherence, not just to Irish but also to European rules when levying taxation.” The law abiding tax evader is a curious species, indeed.

The day was a good one for those seeking to cloak a withered tax system with the suggestion that all was well, despite the prospect of billions eluding the treasury. Things had gone exactly as they should have. The business lobbies of Ireland thought it eminently sensible that companies such as Apple be given appropriate hospitality and incentives to remain, though were also careful to point out that no preferential treatment should be given. Danny McCoy, chief executive of the business membership organisation Ibec, fantasised about making Ireland the “best place” in the world to conduct business. But this came with an aspiration tagged on as an afterthought. “As such it is crucial for all businesses, multinational and indigenous, that Ireland’s tax system is, and is seen to be, transparent and equitable.”

The American Chamber of Commerce was similarly ebullient. Its chief executive, Mark Redmond, seemed to confuse the decision’s merits by assuming that transparency would somehow right the ship of taxation, which, in terms of international capital flows, is monstrously inequitable and opaque. “As the global economy edges toward a recovery of the Covid crisis, it is crucial for future growth that the European Union maintains its hard won global reputation as an inward investment destination underpinned by key pillars including certainly and transparency.” Redmond’s point on investment is hard to fault, which is precisely the problem behind tax schemes such as those used by Apple. Tax havens are not normally famed for their tangible infrastructure and good works arising from the investments of customer companies. Such fora merely serve to wash capital in fictional offices before reaching another destination, freed from the clutches of revenue collectors.

Politically, parties such as Sinn Féin have argued against Apple keeping their windfall. In September 2019, Pearse Doherty claimed that the government was “prioritising the interests of Apple and international finance.” Up till that point, the government had forked out 7 million euros in legal and consultancy fees to fight the competition ruling.

In response to the General Court decision, Doherty, as Sinn Féin finance spokesperson, suggests that it may only permit Apple temporary comfort in the revenue collection wars. Should the Commission challenge the decision’s merits in the European Court of Justice, it can take heart from the overturning of state aid decisions by the General Court in the case of Spanish bank Santander in 2016, and the Spanish tax lease system decision in 2018. “It is therefore likely that this case is to continue for some time, continuing to shine a damaging spotlight on Ireland and its tax arrangements.”

The decision also threatens to scupper the EU strategy in closing loopholes in an aged tax system that did not foresee the rise of digital giants and their cunning methods of evading the public purse. To claim that they function well is both disingenuous and meretricious. It is precisely how well they function that is the problem. “Regardless of today’s judgment,” warned Doherty, “the practice facilitated by Revenue undermined tax fairness. It is that practice that has drawn undue attention to our competitive tax rate.” In the meantime, the corporate giants of slippery capital will rejoice.

Dr. Binoy Kampmark was a Commonwealth Scholar at Selwyn College, Cambridge. He lectures at RMIT University, Melbourne. Email:

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