Pearse Doherty (Donegal, Sinn Fein) | Oireachtas source

Molaim an leasú atá curtha síos ag Sinn Féin. I move amendment No. 1:

To delete all words after "Dáil Éireann:" and substitute the following:"notes the European Commission decision of 30 August 2016 requiring the State to collect €13 billion plus interest from Apple because it benefited from unlawful state aid;

firmly rejects the Government decision to appeal the decision by the European Commission that Ireland provided unlawful state aid to Apple;

recognises that the ruling has no effect on Ireland’s corporation tax rate or on the sole competency of Ireland in setting that rate;

affirms that our corporation tax regime must be competitive, but also fair and transparent, and that it should remain a core part of our economic policy in relation to foreign direct investment;

strongly supports the ongoing work of the Organisation for Economic Co-operation and Development, OECD, and others to tackle aggressive tax planning and harmful tax practices and in combatting the negative impact of tax avoidance on the global economy and the developing world in particular; and

calls on the Government not to appeal the decision of the European Commission and to immediately take the appropriate actions to recover all payments due to the State as per the European Commission decision."

The European Commission's decision to find that this State unlawfully gave Apple an advantage over every other business, big or small, in this State over the course of decades has shocked many people. However, it comes as no shock for people familiar with this area of Irish tax. It sounds right to us because it is right. We know it is right because Apple told the US Senate it was right. The company told the Senate that "since the early 1990s, the Government of Ireland has calculated Apple’s taxable [profits] in such a way as to produce an effective tax rate in the low single digits". Its head of tax operations, Mr. Phillip Bullock, told the US Senate hearings in 2013 as part of his sworn testimony and in response to questioning from Senator Levin that income earned by Apple Sales International and Apple Operations Europe had been subject to tax "in accordance with the agreement that we have with Ireland".

The core of this issue is that Revenue, acting on behalf of this State, sat down with Apple and arranged a deal involving the shifting of profits to a company it knew to be a fiction - a company with no physical presence or staff and no ability to generate profit - so that Apple could avoid the payment of taxes. The Commission has found that a Revenue ruling, which was first made in 1991 and replaced by a similar ruling in 2007, ran contrary to standard tax rules applicable to other businesses. Clear indications of favourable treatment for Apple can be seen in the the Commission sent to the Government advising it of its view that its tax rulings with constituted state aid. The letter in question notes that at a meeting between an Apple tax agent and a Revenue official in 1991 at which the profits of the accounts were outlined to the Revenue official, these figures were not taken as the base point from which to begin a debate on how much tax the branch should pay. Instead, Revenue was willing to discuss and negotiate a computation involving "a profit figure for the Irish branch based on a percentage of the actual costs attributable to the Irish branch". This clearly shows that Revenue did not start the discussions on taxation at the standard starting point - the accounts - as a means of addressing the issue in a manner that would be more favourable to Apple. As we all know, businesses normally pay taxes on their profits as opposed to notional figures.

The Commission has stated that the agreement between Revenue and Apple did not correspond to economic reality because almost all profits that were generated and recorded by the two companies in Ireland were internally attributed to a head office which existed only on paper and could not have generated such profits. Essentially, profits of €104 billion earned between 2003 and 2014 were sent away from Cork into a sort of untaxed Bermuda Triangle. The advantage that was conferred in 2014 was an effective tax rate of 0.005%, or €50 in tax from every €1 million of profit. I suggest this is the very definition of state aid because it involves favouring one company over others with special treatment. The Commission examined 1,000 tax rulings across every EU member state, including hundreds of rulings from Ireland. It asked Revenue and the Department to provide information to show that this approach was not a selective one, but they failed to do so over three years in a manner that would convince the Commission.

One of the tests of state aid is that it costs the state. We must remember this was not a cost-neutral exercise. Taxes of €13 billion that were due to the State, and should have been collected by the State, were not paid over a ten-year period. At a time when Deputy Micheál Martin's party was in government and was cutting the blind pension, reducing the minimum wage and closing hospital beds, this tax was being avoided and was not being paid to Ireland. The Commission's assertion is that the Irish branches of Apple Sales International and Apple Operations Europe, both of which are tax resident in Ireland, generated the profits that are being referred to. These branches not only dealt with the sales of Apple products in Ireland, but also organised the manufacturing and distribution of all Apple products throughout the world outside the Americas. This means that all iPhones, iPads and other Apple products sold outside the Americas can be linked back to two Irish incorporated companies, the profits of which were recorded here. Under this agreement, yearly payments are made to Apple in the US to fund research and development efforts conducted on behalf of the Irish companies in the US. They shared the risks and the owned the economic rights to the intellectual properties.

This issue is not news to all concerned, as it came to the fore internationally in May 2013 when the US Senate Permanent Subcommittee on Investigations conducted a hearing into the offshore strategies of Apple. Details of this favourable treatment were disclosed by Apple's head of tax operations, Mr. Phillip Bullock, when he told the US Senate hearings in response to questions from Senator Levin that income earned by Apple Sales International and Apple Operations Europe has been subject to tax "in accordance with the agreement that we have with Ireland". He further confirmed during questioning that this agreement with Ireland restricted Apple's corporate tax rate to a maximum of approximately 2%. The sworn evidence given by Apple's head of tax operations, and indeed by the CEO of Apple, Mr. Cook, clearly indicates that the Irish tax rulings provided to Apple enabled Apple to pay substantially less tax than other companies. This is illegal under EU state aid rules.

This issue has been coming down the rails for some time. It is embarrassing for us that the Commission had to carry out this investigation and make this ruling because this Parliament failed to carry out the necessary investigations. Those of us who have tried to raise this issue have been shouted down by Ministers merely for mentioning the word "Apple". When, at my suggestion, the Joint Committee on Finance, Public Expenditure and Reform set up a sub-committee to consider this issue, Fine Gael, Fianna Fáil, the Labour Party and Deputy Donnelly circled the wagons so that no executive from Apple or any other multinational company would be invited before the committee. The fear of discussing this issue was so crippling that questions were not allowed to be asked. When I argued that the State should close down the "double Irish" scheme, which has been in place for many years and was overseen by Deputy Micheál Martin and his party for much of that time, I was told at least three times by the Minister, Deputy Noonan, that it was not Ireland’s problem. Of course, it was eventually ended with a generous phasing-out period. When I first raised the issue of stateless companies exploiting Ireland to avoid tax, I was treated like a nuisance. I was told I was causing the country reputational damage. It is our problem now. It was only after I drafted legislation to remove the practice of facilitating stateless companies that the Government acted. For too long, this State has had its head in the sand when it comes to global moves towards tax transparency and fairness.

The Commission has ruled that this is our money. I would like to deal briefly with the clear attempt at misinformation that is being made by those who argue that this €13 billion in back tax is some type of magic money that is not ours. The figure of €13 billion accrues from profits of €104 billion generated by the Irish branches of Irish-incorporated companies, Apple Sales International and Apple Operations Europe, on sales outside the Americas between 2004 and 2013. To date, these profits have not been taxed anywhere in the world. The suggestion that we cannot be the tax collector of the whole world does not mean anything. If profits are generated and booked here, they should be taxed here. That is how it works.

Let us now look at the straw man argument that Fine Gael and Fianna Fáil have trotted out with a single voice. Every excuse under the sun has been invoked to deflect our responsibility. We are told the EU Commission has overreached, that this is a political power grab by Brussels. Since the 1970s the Commission has been enforcing state aid law. In 2003, for example, as Fintan O’Toole repeatedly points out, it ruled that Ireland’s so-called foreign income scheme was illegal state aid.

One would think listening to Fine Gael that the EU Commission using state aid rules to look at taxation issues was an unprecedented event. Far from it. Only two months ago the Minister for Finance listed three taxation measures announced within the last couple of years alone that are still awaiting state aid approval: stamp duty changes, relief on stamp duty for farmers and tax relief for succession planning for farmers. These are all being inspected in Brussels but no angry pitchfork marches and no passionate defences of sovereignty have ensued. The Minister, and those in opposition who support him, know that his flagship living city initiative was repeatedly delayed and amended significantly before getting EU state aid approval. Eventually, after years, it was brought in with significant changes. The EU has been using state aid to consider tax measures for as long as the state aid rules have existed. The Minister and others here have experience of state aid and how it works. They are trying to mix it up as some new attempt to undermine sovereignty which is a dishonest assertion. It is a cynical lie to suggest there is any new threat to our corporation tax rate in last week’s move. It is a lie and those who are peddling it know it only too well.

The other cobbled together argument is that this is an attack on small nations. Let us look at that. In 2014 Germany was found to have given state aid to the Nurburgring racetrack and ordered to recoup €1.27 billion, the highest state aid ruling bar the Apple one, and it happened only two years ago to the biggest country of them all. For the record, the Commissioner who made this ruling, supported by Phil Hogan and others, is from Denmark, a country with a population approximately the same size as our own. All this talk of the freedom of small nations is as ridiculous now as it was 100 years ago.

Then we had the scaremongering about jobs and we heard it again today from Deputy Micheál Martin. It may come as news to him that following the EU Commission's announcement, Apple made a statement committing itself to Ireland and pledging ongoing investment. I warmly welcome that. Why would it not? After all, the loophole that allowed this deal to operate has been closed for some time. This is an issue of the past. It is a legacy issue. The loophole has been closed and all the evidence points to more investment by Apple and more tax being paid, both of which are to be welcomed.

People should not just take my word for it that this will not affect jobs or corporations coming here. The ratings agency, Fitch, has said that “Ireland’s low corporate tax rate, and its high human development and governance indicators should keep the business environment attractive to multinationals, and the costs of relocating would be large”. It also said that the windfall would reduce our debt. It is right of course. There is no economic reason to turn up our noses at the Commission's ruling that we are entitled to €13 billion in tax back and approximately €6 billion in interest owed to us.

The other red herring is the argument that the EU is wrong to apply this ruling retrospectively. That is nonsense. All state aid investigations and rulings are retrospective. That is how they work. They cannot look into the future, they have to look at the past. It is nonsense being peddled by these two parties which obviously had a couple of focus groups and decided what type of line was best to put out to muddy this issue. Ask any businessman or businesswoman who has ever been audited about the powers of Revenue to act retrospectively. Of course it can be applied retrospectively. Look, for example, at what the Internal Revenue Service, IRS, the US tax authority, is doing to Coca Cola, looking for $3.3 billion in retrospective taxes despite having given it a clean bill of health some years ago.

All this deflection, all these red herrings, show that Fine Gael and Fianna Fáil do not get it. This is not about the Commission overreaching, it is not some sort of attack on small nations, it is not about jealousy and there is no threat to our jobs but there is clear evidence that Apple got special treatment from this State over decades.

Last Tuesday the EU Commission sent a mighty shock through the Irish establishment. By doing so it has unwittingly unleashed the most unlikely patriots who, remarkably, had hidden their passion for Irish sovereignty throughout their entire careers. Not even when the Troika strolled into Dublin dictating brutal cuts to our social system and public services did these brave Irish patriots show their true colours. When the European Central Bank told us not to burn bondholders and instead make the Irish people pay, they kept their nerve, waiting for their moment to strike. When the EU Commission said they must charge the Irish people for water they cunningly went along with it. When the International Monetary Fund demanded that our young teachers and nurses be made pay for events before their time, they waited still. Some thought they were just quislings but it turns out they were instead very deep under cover.

Now, finally, their day has come, the secret patriots of Fine Gael, Fianna Fáil and the Labour Party like the men and women of 1916 “having resolutely waited for the right moment" to reveal themselves have emerged to strike a blow for Irish sovereignty. Perhaps the Proclamation needs a new verse about the right of one multinational to be treated better than everyone else in this so-called republic of ours. Their years of careful preparation have, however, been wasted. Their patriotic fervour is wasted on an issue that is not about sovereignty, it is about fairness and justice. Immense damage has been done to Ireland’s reputation because of this affair and no appeal is going to repair it. The only people who will benefit from an appeal are the lawyers. They stand to gain millions while the Irish people can only lose billions.

The Minister for Finance, Deputy Noonan, in one of his first interviews after this decision, dismissed the idea that there was a moral case to be answered. There certainly is. For almost 20 years Revenue officials were aware that a company which has generated over €100 billion in profit in the last decade alone had no tax residency anywhere in the world, yet nothing was done. Questions need to be asked about how, or if, this was brought to the attention of the political authorities who in the normal course of events would have closed down the loophole. How did that happen? How did the Revenue Commissioners not notify the politicians or did they? What then did the politicians say if they were notified? In the case of a stateless company a blind eye was turned for over two decades. Nobody in this Chamber today would stand up and say that what was happening, whereby Apple could book €100 billion in profit without paying tax anywhere in the world, was right. Many people in this Chamber, however, served in the governments that oversaw that system for over two decades. I want to know if they knew that this was happening because it could easily have been closed down, as it was in 2003 when we found out that it was in fact happening.

Of course we need to see the full EU ruling or at least as much of it as possible as soon as possible. It has been suggested we could be waiting months. That is unacceptable. Will the Government give a clear indication of when we will see the decision, including the advance opinions we are giving to Apple? We need to know where the political responsibility lies for cutting these deals that have cost the Irish people far more than even the €13 billion we might hopefully get back. If the Commission was not limited by a Statute of Limitations it could have come up with a much higher figure. We need to know why the Revenue Commissioners would feel empowered to make a deal with a company that limited its effective tax rate. I reiterate that the scale and cost of this deal to the Irish people is so big that a public inquiry is required. Nobody who supports Ireland’s right to set its own tax rates or its right to compete to win foreign direct investment should have any issue in supporting the amendment in my name.

The amendment rejects the idea that it is in the interest of the Irish people to appeal this ruling. How could it possibly be? Only this week we have heard of hospitals turning away patients in need of brain surgery, of the massive requirement for investment in our education system and of Exchequer returns not matching targets. The amount of money owed to us is €13 billion plus interest. It is not a gift, it is not a penalty, it is simply what is owed in unpaid taxes. Some political parties and other commentators can try to justify saying no to €13 billion and can try to justify spending millions of euro to make sure we do not get it. However, my party cannot. We know the reality in our hospitals, in our schools and in our communities. Fundamentally this is a question of equal treatment of all the players in our economy. We all know constituents, small businessmen and businesswomen, who have been chased by Revenue into liquidation for as little as €3,000, yet €13 billion is not worth chasing it seems.

We recognise that Apple is free to appeal and will appeal. For those who argue that we need legal certainty, that will come but we do not need to pay lawyers millions of the people’s money to get that. It is time to move on and to stop fighting yesterday’s battles.

In 2016, let us drop the mock patriotism and focus on playing a part in what is hopefully a more transparent, fair and prosperous international tax system. Our country is crying out for investment and for good employers. We can have both. The idea before us in the Government motion is ultimately that we want to be able to break the rules for some of our friends. That is not good enough. The same motion states it will fight tooth and nail to make sure not one red cent of the money owed to the Irish people is returned to us. Tax is not just for the small man, it is for all - big companies, small companies, workers, farmers and even politicians. Nobody can argue that this deal was justified, knowing what we know. I welcome the decision the Minister took yesterday regarding section 110 companies and the loophole. We will examine the legislation that has been published in draft form and we will comment on it then. I have been raising this issue with the Minister since March of this year. This does not deal with the major vehicle that is being used by international players to buy up property in this State.

Let us hear what Davy states in its advertisement. It states that the qualifying investor alternative investment fund is "the vehicle of choice for private [...] investors who are undertaking large scale investment in real estate". The Minister knows, and I know, that any international investor who invests in those funds does not pay a penny of tax in this country. Let us look at some examples. Property investment giant Kennedy Wilson Europe Real Estate holds circa €1 billion in assets in Ireland, with €26 million in rental income in the first six months of this year, yet it pays no tax in the State, and the Government's legislation will not change that. Cedar Real Estate Investments is another qualifying investor alternative investment fund, which is being paid €2.3 million every year by the Central Bank to rent its property. It does not pay a penny in tax here because it is a qualifying investor alternative investment fund. Let us look at what Denis O'Brien did with his Irish Collective Asset-management Vehicle, ICAV, whereby he was able to reduce his tax liability, with the loss of €10 million to the Irish Exchequer. That will not change under this legislation. Non-resident investors in IPUT, who got €30 million in profits last year, will not pay a penny in tax on its property-related profits because of this qualifying investor alternative investment fund, which holds assets of over €300 billion. These loopholes, along with what was announced yesterday, need to be closed down in this year's finance Bill.

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