On October 18, 2013 we posted Ireland to Close Highly Criticized Loophole, but Create an Even Bigger One where we discussed that Ireland said it planned to shut down a much-criticized tax arrangement used by Apple Inc to shelter over $40 billion from taxation, but will leave open an even bigger loophole that means the computer giant is unlikely to pay any more tax. The highly criticized arrangement has become known in the tax avoidance industry as the "double Irish". this arrangement has been used by Google, Microsoft & Apple, just to name a few.
Paschal Donohoe, who has been serving as Ireland’s minister for finance and public expenditure and reform, told the German newspaper Frankfurter Allgemeine that he disagrees with the European Commission’s August 2016 ruling, which concluded that Apple had entered into a sweetheart tax deal with the Irish government to “substantially and artificially” lower its taxes.
Both Ireland and Apple have appealed the commission’s decision, which found that two tax rulings Ireland had issued to Apple in 1991 and 2007, allowing the software giant to allocate almost all of its sales profits to “head offices” that existed only on paper, were in violation of the EU’s state aid rules.
Under the EU's unique state aid system, national tax authorities are barred from giving benefits to some companies that are not available to others, and member states cannot treat multinational companies more favorably than standalone companies.
The commission said that the allocation of profits to head offices, with no employees or physical locations, allowed Apple’s effective corporate tax rate to go down from 1 percent in 2003 to 0.005 percent in 2014 on the profits of the Irish-incorporated subsidiary Apple Sales International.
The commission’s investigations into Apple’s tax arrangements, as well as those of Starbucks Corp., had previously drawn the ire of the Obama administration, which complained that the commission appeared to be unfairly targeting U.S. businesses and that American taxpayers may end up having to foot the bill for foreign tax credits that the companies may be able to claim following a retroactive imposition of taxes.
A U.S. government has filed an application to intervene in Apple’s suit so that it can have its say on the retroactive application of state aid rules to the company.
Read more at: Tax Times blog