A Department of Finance document, covering the Government’s decision to appeal the European Commission ruling that Ireland granted Apple illegal State aid, has been disseminated to all TDs.
The explanatory document looks at the background to the Commission's decision regarding Ireland's tax treatment of Apple.
The Commission concluded that Ireland had granted undue tax benefits of up to €13bn to Apple and said "selective treatment" allowed the company to pay a tax rate of 1% on European Union profits in 2003 down to 0.005% in 2014.
The document for TDs outlines the US tech company’s activities and structures and looks at Revenue's tax treatment of Apple in 1991 and 2007.
TDs receive 16 page explanatory document from dept of finance re #AppleTax @rtenews pic.twitter.com/3C5I72wT9J
— Martina Fitzgerald (@MartinaFitzg) September 6, 2016
It states the Commission noted that such tax rulings are perfectly legal. They are comfort letters issued by the tax authorities to give a company clarity on how its corporate tax will be calculated or on the use of special tax provisions.
The document states that the Commission concluded the tax rulings issued by Ireland endorsed an artificial allocation of Apple Sales International and Apple Operations Europe's sales profits to their 'head offices', where they were not taxed.
As a result, the Commission stated that the tax rulings enabled Apple to pay substantially less tax than other companies, which is illegal under EU state-aid rules.
The Commission rejected Ireland's position that the relevant Irish law only allowed the Irish authorities to consider and tax the profits arising from the activities of the branches in Cork.
The circulation of the explanatory document to TDs comes as the Dáil has been recalled early to sit tomorrow to debate the Commission’s confidential 150-page ruling.
Although the Government is prohibited from publishing the full report by the Commission, the document gives TDs more information on the background to the case.
The document also states that the commission elaborated that Apple's tax structure in Europe, and whether profits could have been recorded in the countries where the sales effectively took place, are not issues covered by EU state aid rules.
The document states that if profits were recorded in other countries this could however affect the amount of recovery by Ireland.
The document continues that the Government's position is that this case centres on a mismatch between the company residence rules in Ireland and the US, the result of which was that the companies concerned were 'stateless' for tax purposes.
It states this arose from a mismatch between Irish and US tax rules on company residency. It states the Irish part of this mismatch has since been addressed through legislative amendments to company tax residence rules.
In the Government's view, the European Commission's decision undermines, impedes and conflicts with the global consensus, the document reports.
Minister for Finance Michael Noonan has said the commission's report will not be published until Apple and the Government "have the opportunity to study it in detail and to redact or cross out sections of it which are commercially sensitive."
He said this will "apply to the company, in effect, rather than to the country."
Deputies also got this from the dept of finance re #appletax @rtenews pic.twitter.com/OBlCuvWEjG
— Martina Fitzgerald (@MartinaFitzg) September 6, 2016
The Department of Finance also sent deputies a white paper from the US Department of the Treasury on the European Commission's recent state aid investigations into transfer pricing rules.
It is dated 24 August 2016, which is before the Commission's decision last Tuesday.
The document states that the commission's approach is new and departs from prior EU case law and commission decisions.
It also states that the commission should not seek retroactive recoveries under its new approach which it states is inconsistent with international norms and undermines the international tax system.
