Apple Tax Campaign
The European Commission's investigation into the relationship between Apple Inc. and Irish Revenue has quickly become one of the most prominent issues for financial justice campaigners in Ireland, with huge potential ramifications for other Ireland, other EU member states, and the Global South. Here you will find a summary and background of the issues, as well as what we can expect for the future.
Because this is an ongoing campaign, this page will be periodically updated as the case unfolds.
What is Apple accused of doing?
Apple was one of the first Multi-National Corporations (MNCs) to exploit Ireland's porous tax structures, and began investing through a "Double Irish" scheme from as early as the 1980s in order to avoid paying its fair share of taxes.
The recent investigation, which began in 2014, was conducted by the European Commission, and found that The Irish Government gave Apple unfair advantages (what is known as state aid) through two secretive tax dealings in 1991 and 2007, in contravention of EU competition laws. According to this investigation, Irish tax authorities offered the corporation an incredibly low tax rate, as low as 0.005% in effective tax. This means that Ireland is now obliged to collect €13 billion, plus interest from Apple Inc.
Although it is important to note that that this practice severely undermines Ireland's credibility abroad, it has an even more direct effect on the Irish people. The fact that this huge sum of money was not made available to the people of Ireland during the worst recession in recent memory is a very troubling concern. In fact, it has been calculated that if the revenue were properly invested, it could radically transform Irish society, almost tripling the planned output of affordable housing, allowing for the expansion of public transit services, and improving Ireland’s decaying health infrastructure.
This is tax revenue that rightfully belongs to the people of Ireland. According to the European Comission:
"...any reduction of tax for Apple results in a loss of tax revenue that otherwise would have been available to Ireland."
The extent of this form of tax avoidance is enormous. Each year, it is estimated that the EU loses roughly €1 trillion to tax evasion and avoidance. Yet this is not just a problem that effects the Global North. Such secret tax deals enormously reduce the tax take in poorer countries, where companies such as Apple operate, but fail to declare accurate tax information. In fact, poorer countries lose more revenue each year to tax-dodging than they receive as developmental aid, and risk losing out on the beneficial side effects of governance and state-building through the strengthening of their democratic institutions.
How did this happen?
While the loopholes in the Irish tax system have been known to MNCs for many years, they have only recently come under scrutiny from the Irish Government, spurred by mounting international pressure from the US and EU. This is not to say that the government has been eager to tackle this issue; in fact, Minister for Finance Michael Noonan has vowed to appeal this ruling in European Courts, effectively turning down this huge windfall.
Because these tax deals were so secretive, it is almost impossible for the public, or even the Oireachtas to know exactly what went on. This is due to the chronic lack of transparency that exists within the Irish tax network, which considers vital tax information that could benefit the people of Ireland and elsewhere, as confidential. According to the Irish Government "Ireland does not have a statutorily-binding tax ruling system". Instead, Revenue Commissioners offer taxpayers "non-binding advance opinions" around which companies can calculate their tax footprint. In the case of Apple, however, these opinions were taken as a legitimate indication of what Revenue expected Apple to pay. This not only granted Revenue extreme discretion over Apple's tax bill, these advance opinions are also treated by Revenue as highly confidential - there is no disclosure or publication of the number or substance of the opinions made by Revenue Commissioners.
In spite of this secrecy, the European Commission managed to make two key findings. The first is that Ireland gave Apple preferential treatment in its tax rulings, allegedly breaking the "arm's length principle", which states that no company may be taxed differently compared to independent companies of the same corporate group. The second is that there was "no scientific basis" for profit allocation, with some figures for Apple's Irish subsidiaries allegedly being "reverse engineered" in order to arrive at an agreeable taxable income for the corporation.
The European Commission has also drawn attention to the political side of these secret tax deals, alleging that the Irish Government deliberately offered these extremely low tax liabilities to help secure jobs in Apple's Irish base of operations in Cork.
As the ruling is still quite recent, it can be hard to gauge the full extent of the fallout. Both Apple and the Irish Government are appealing the results, a process which could take years. However, according to EU law, Ireland still has to recover the aid from the beneficiary organisation, plus interest, within 10 years. these funds will likely be placed in what is known as an escrow account, where they will be frozen for use until a final verdict can be reached.
Meanwhile, the findings reached by the Commission should encourage political and public debate over the role of MNCs and tax deals in Ireland and abroad. The Apple case should also prompt the EU in general, and the Irish Government in particular, to adopt more rigourous tax protocols, and to increase tax transparency.
DDCI is taking an active role in the campaign against the Ireland's unfair tax policies, lobbying the Government, organising protests, raising awareness, and speaking out against this injustice. In response to this ruling, DDCI believes that the government should take the following actions:
- Click here to download our paper "Corporate Tax Secrecy and the State"Publish the full results of the Apple investigation
- Commission an independent review of Revenue, and reform its practice to ensure greater transparency
- Reform tax rulings so that they are not open-ended, but are instead costed, and ensure that these care included in government estimates
- Include revenue foregone as a consequence of tax rulings as an expenditure in the government estimates and budget
- Mandate the Public Accounts Committee to carry out a full review of the use of tax rulings by Apple and other MNCs
- Carry out a study into the revenues lost to the the Global South as a result of Ireland's tax rulings, and outline how Ireland will remediate such effects