Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Ireland’s tax benefits gave Apple competitive advantage, (Aug 31, 2016)
Organizations Mentioned:Apple | Apple Inc.
By Michael Menzhuber, J.D., LL.M.
Following an in-depth state aid investigation launched in June 2014, the European Commission (EC) has concluded that from 2003 to 2014 Ireland granted undue tax benefits of up to €13 billion to Apple Sales International (ASI) and Apple Operations Europe (AOE), the agency has announced.
ASI and AOE are Irish-incorporated companies that are fully-owned by the Apple Group and controlled by the U. S. parent, Apple Inc. Apple’s sales operations in Europe were set up so that customers were contractually buying products from ASI in Ireland, rather than from shops that physically sold the products. In this way, Apple recorded all sales, and the profits stemming from the sales, directly in Ireland.
The taxable profits of ASI and AOE were determined by a tax ruling granted by Ireland in 1991 and a similar second tax ruling in 2007. The two tax rulings, which concerned the allocation of profits with ASI, endorsed a split of profits for tax purposes in Ireland. Under the agreed method, most of ASI’s profits were internally allocated away from Ireland to a "head office", which was not based in any country and did not have any employees or own premises, where they remained untaxed. On the basis of these two tax rulings, AOE benefited from a similar tax arrangement over the same period of time.
The selective tax treatment is illegal under European Union (EU) state aid rules because it gives Apple a significant advantage over other businesses that are subject to the same national taxation rules, according to the EC. Commissioner Margrethe Vestager stated that the EC’s decision, that Apple’s tax benefits in Ireland are illegal and that Ireland must recover €13 billion in unpaid taxes from Apple, shows that the Commission can "act when a member state gives illegal aid to a company" and that "this is a good thing since illegal state aid harms competition."
Companies: Apple Inc.
News: Antitrust