Dáil debates

Wednesday, 7 September 2016

Government Appeal of European Commission Decision on State Aid to Apple: Motion

 

5:25 pm

Photo of Seán SherlockSeán Sherlock (Cork East, Labour) | Oireachtas source

In the few minutes available, I wish to crystallise my interpretation of this issue as best I can. I represent part of the county of Cork and many of my constituents work for Apple. There is no doubt, based on the feedback I have received, that there is concern for the long-term future of Apple and other FDI companies located in the Cork region in particular. There is concern about the possible effect of the Commission's ruling on long-term investment on Irish soil and on our ability to sustain the employment that already exists not only in Cork but also throughout the Republic as a whole.

Members must distinguish between what was interpreted as a breach of state aid rules, on one hand, and an overreaching by the European Commission into the sovereign affairs of a member state on a matter of taxation policy, on the other. I have been trying to get to the nub of the issue and there is a very good blog post by Mr. Tony Connelly of RTE which outlines what is at play here. He argues that for a tax concessions such as that given to Apple to qualify as illegal state aid, four criteria must be fulfilled. The aid "must be provided by the state and financed by state resources" - that is questionable. It must "grant advantage". Did it grant advantage to other companies in a similar sector? The advantage must be "selective", that is, "it goes to one company or one category of companies with a specific commercial activity, and not to others". Finally, it must "distort competition and trade within the EU". If it does not meet those four criteria, then arguably, the ruling should fall and there are questions around whether those criteria are being applied objectively as they relate to the treaties of the European Union.

I wish to refer briefly to the US Treasury Department's white paper, which was issued on 24 August and which is entitled, The European Commission's Recent State Aid Investigations of Transfer Pricing Rulings. This document makes the following very pertinent point:

There is the possibility that any repayments ordered by the Commission will be considered foreign income taxes that are creditable against U.S. taxes owed by the companies in the United States. If so, the companies’ U.S. tax liability would be reduced dollar for dollar by these recoveries when their offshore earnings are repatriated or treated as repatriated as part of possible U.S. tax reform. To the extent that such foreign taxes are imposed on income that should not have been attributable to the relevant Member State, that outcome is deeply troubling, as it would effectively constitute a transfer of revenue to the EU from the U.S. government and its taxpayers.

It goes on to say:

Adopting new enforcement regimes with retroactive effect will hinder companies’ ability to assess risks and plan for the future, and sets an unwelcome precedent for tax authorities around the world to take similar retroactive actions that could affect U.S. and EU companies alike. It also undermines the G20 agenda to improve tax certainty.

There is a battleground here and that battleground is Ireland. This country is being used as a battleground between the European Union and the United States of America to see who can give effect to the issue of global tax justice and transparency. It is our contention that the only reasonable and logical thing to do is to be joined in an appeal of this decision. There is a pertinent political point here as to whether the Commission is perceived to be reaching into the sovereignty of a member state in the area of taxation policy. There is precedent here where taxation has been or could be deemed to have been used as a state-aid tool and there are established cases in that regard, for example, one involving the Spanish bank Santander. Europe is moving to the extreme right at present and while Ireland, as a nation, has always been vehemently pro-European, there is a perception that the European Commission is overreaching in this particular case.

The Revenue Commissioners have stated clearly that there was no departure from the applicable Irish tax law. There are some in this House who do not want to believe the Chairman of the Revenue Commissioners and that is fair enough, particularly if they want to make a political point in that regard. I accept the statement by the Chairman of the Revenue Commissioners. On the basis of the fact that the Revenue is an independent statutory body, we should make this appeal.

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