Ireland’s budget surplus could be “at risk” if the European Court of Justice rules against the Government, an economist has warned.
Apple’s European headquarters is located in Cork and in 2016, a court ruled the company had been given illegal tax breaks and owed the Government €13 billion in back taxes.
The Government appealed the decision and in 2020 the European Union's second-highest court overturned the ruling on the grounds there was no evidence Apple had broken the EU competition law.
In turn, the European Commission lodged an appeal and the case begins in the ECJ today.
“The reality is that if Ireland gets the €13 billion, its reputational damage and maybe its status with the multinationals could be significantly affected,” economist Austin Hughes said.
“In those circumstances, the much discussed €60-65 billion of Government surpluses that are expected over the next couple of years could be placed at risk.”
Following the 2020 decision, Apple said it was “not about how much tax we pay, but where we are required to pay it” and said the company was “proud to be the largest taxpayer in the world, as we know the important role tax payments play in society."
At stake is not just Apple’s tax affairs but also two fundamentally different philosophies about competition and tax policy.
The Irish Government feels EU member states should be allowed to set their own tax affairs, while the European Commission believes Ireland is breaching competition law.
“The European Commission is on a mission, effectively, to try and deal with tax irregularities by large multinationals right across Europe,” Mr Hughes said.
“From the Irish Government’s case and Apple’s position, they feel they have done no wrong and the initial court decision vindicated that.”
Ireland’s 12.5% rate of corporation tax is the lowest in the European Union but will rise to 15% next year following an OECD agreement on minimum global tax rates.
Surging corporation tax receipts mean Ireland is expected to record a budget surplus of around €10 billion in 2023 and €16 billion the following year.
Main image: Euro notes.