EU Takes Court Action over Apple’s Illegal Tax Benefits in Ireland

The recent release of the “Paradise Papers” has brought to light the way in which companies have been using offshore tax havens to reduce their tax bills. The document has also revealed how the multinational technology giant Apple has used tax havens to “avoid tax”.

In 2015, Apple moved two of its subsidiaries from Ireland to Jersey. The EU had been pressuring Ireland for years over the “holes in their tax laws” including the “Double Irish”. Ireland had been used by large businesses to form subsidiaries and shell companies because of its business friendly tax laws, and when its laws changed, Apple was accused of avoiding paying their fair share of tax by moving its subsidiaries to Jersey.

Jersey is commonly used by corporations as a tax haven as it doesn’t usually charge any tax on corporate income. When apple changed its tax policy, they consulted a company called Appleby who specialize in helping clients lower their taxes. According to the leaked document, two subsidiaries Apple Operations International (AOI) and Apple Sales International (ASI) were moved to Jersey in 2015.

Apple’s response to the claims

Apple claims in a recent statement that it has paid all taxes it legally owes. A spokesperson for the company said that “When Ireland changed its tax laws in 2015, we complied by changing the residency of our Irish subsidiaries and we informed Ireland, the European commission and the United States. The changes we made did not reduce our tax payments in any country. We’ve paid over $35 billion in corporate income taxes over the past three years, plus billions of dollars more in property tax, payroll tax, sales tax and VAT. We believe every company has a responsibility to pay the taxes they owe and we’re proud of the economic contributions we make to the countries and communities where we do business”

Ireland referred to European Court of Justice

The European Commission has announced in a press release that since Ireland has failed to recover the EUR 13 Billion from Apple as required, they will now be referred to the European Court of Justice. The commission commented that:

“Ireland has to recover up to 13 billion euros in illegal State aid from Apple. However, more than one year after the Commission adopted this decision, Ireland has still not recovered the money, also not in part. We of course understand that recovery in certain cases may be more complex than in others, and we are always ready to assist. But Member States need to make sufficient progress to restore competition. That is why we have today decided to refer Ireland to the EU Court for failing to implement our decision.”

The deadline for Ireland to recover the money from Apple was 3 January 2017, which is in line with the commissions procedures. It’s now a year after the decision was made, and Ireland has yet to recover any of the legal aid it was required to. Although Ireland has made some progress on calculating the amount of legal aid which should be granted to Apple, it’s estimated that this case will be ongoing until at least March 2018.

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