Taxation and State aid, when valid bilateral legal agreements are against the EU rules
by Emanuele Bonini
The Apple case is by now «the case». It doesn't happen every day to see a big corporation recognised as beneficiary of 13 billion Euro of illegal state aid. The European Commission found the tax rulings signed between the Irish government and the American farm against the EU rules. After an investigation lasted more than two years, the European Commission has in fact concluded that Ireland granted undue tax benefits, leaving Apple pay an effective corporate tax rate that declined from 1% in 2003 to 0.005% in 2014 on the profits. This is the story, and it has been now become the cult event of the year. Apple replied by announcing all the possible negative consequences for both investments and employment that this decision can create. Call it a blackmail if you want, but of course this is story doesn't stop here. It is a very complicated case, whose solution is not easy to be found. However some considerations are possible.
No sanctions. «This is not a penalty, it is unpaid taxes to be paid», pointed out Margrethe Vestager, the European commissioner in charge of competition policy. Although everybody wrote already that the EU imposed a fine against Apple, there are no fines under EU State aid rules and recovery does not penalise the company in question. As a matter of principle, EU state aid rules require that incompatible state aid is recovered in order to remove the distortion of competition created by the aid. The decision of this nature simply restore equal treatment with other companies. It is up to the Member State getting the money back.
No actions against Apple. As already said, the decision taken in Brussels neither hit nor penalise Apple. Illegal State aids oblige national authorities to ask the company in question to repay the unfair benefit. In case of non compliance with the European Commission requests, the European Commission can open an infringement procedure against the Member State for non-recovery of State aid. The infringement procedure can bring to a fine against the member State. So, the action of the EU Commission has been taken against the Irish authorities, as underlined by the official press release issued («State aid: Ireland gave illegal tax benefits to Apple worth up to €13 billion»). Nevertheless, Apple is the beneficiary of a tax agreement signed in violation of EU rules.
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| source: European Commission |
The Apple case is by now «the case». It doesn't happen every day to see a big corporation recognised as beneficiary of 13 billion Euro of illegal state aid. The European Commission found the tax rulings signed between the Irish government and the American farm against the EU rules. After an investigation lasted more than two years, the European Commission has in fact concluded that Ireland granted undue tax benefits, leaving Apple pay an effective corporate tax rate that declined from 1% in 2003 to 0.005% in 2014 on the profits. This is the story, and it has been now become the cult event of the year. Apple replied by announcing all the possible negative consequences for both investments and employment that this decision can create. Call it a blackmail if you want, but of course this is story doesn't stop here. It is a very complicated case, whose solution is not easy to be found. However some considerations are possible.
No sanctions. «This is not a penalty, it is unpaid taxes to be paid», pointed out Margrethe Vestager, the European commissioner in charge of competition policy. Although everybody wrote already that the EU imposed a fine against Apple, there are no fines under EU State aid rules and recovery does not penalise the company in question. As a matter of principle, EU state aid rules require that incompatible state aid is recovered in order to remove the distortion of competition created by the aid. The decision of this nature simply restore equal treatment with other companies. It is up to the Member State getting the money back.
No actions against Apple. As already said, the decision taken in Brussels neither hit nor penalise Apple. Illegal State aids oblige national authorities to ask the company in question to repay the unfair benefit. In case of non compliance with the European Commission requests, the European Commission can open an infringement procedure against the Member State for non-recovery of State aid. The infringement procedure can bring to a fine against the member State. So, the action of the EU Commission has been taken against the Irish authorities, as underlined by the official press release issued («State aid: Ireland gave illegal tax benefits to Apple worth up to €13 billion»). Nevertheless, Apple is the beneficiary of a tax agreement signed in violation of EU rules.
