Ireland Apple tax case Q&A: What happened in court, what does it mean and where does the €13bn go?

The court inflicted a heavy legal defeat on Apple and on the Irish Government. It said that the European Commission was correct back in 2016 to rule that Apple owed Ireland €13 billion in tax relating to underpayments over the years 2003 to 2014.
The commission’s original case was that Ireland had illegally favoured Apple by doing two special tax deals in 1991 and 2007, representing what it said was illegal State aid. This relates to the way it allocated its profits through companies set up in Ireland and the resulting low level of tax paid on its international earnings.
This decision had been subject to lengthy legal appeals and a lower European court had ruled that the European Commission’s case was flawed and that Apple did not owe the money.
The European Court of Justice (ECJ) disagreed, dismissed the arguments of Apple and the Irish State and ruled that the money must be paid. There is no further route of appeal so it is game over.
Ireland loses the case but wins the money!
Back in 2016 the State joined Apple in appealing against the European Commission ruling because it said it would undermine the integrity of the Irish corporate tax system, lead to a lack of tax certainty for big US companies based here and represented an undue interference by the commission in Ireland’s tax affairs.
This caused a fuss at the time, as the exchequer was less flush with cash than it is now. The argument of the government back then was that the case was important to underpin future US investment and corporation tax payments. It also wanted to be seen to support the US multinational sector, a big investor here.
Yes. The cash held in an escrow account since the original judgment – amounting to €13.8 billion at the end of last year – is now due to be paid over to Ireland and the Government had said it will collect it.
The only possible wrinkle is the original European Commission judgment suggested that some other EU countries where Apple made sales might have a claim on some of the money. It remains to be seen if any emerge.
The €13 billion is not worth as much in real terms as it was back in 2016, but it is still a lot of money. To put it in context, total State spending amounts to around €100 billion this year – though remember that the Apple money is a once-off payment.
It is equivalent to a boost of close to half of the expected corporation tax total this year. Or around 6 per cent of Ireland’s total outstanding national debt.
The Government could decide to park it in one or both of the funds set up this year to save for the future – one of these funds is a long-term one, but cash can be drawn down from the other more quickly to support climate investment, or keep State investment spending going if the exchequer comes under pressure.
[ Ireland to ‘respect’ ruling by EU court in Apple tax case as transfer of €13bn beginsOpens in new window ]
Given that it is a once-off cash amount, the Government is likely to indicate that either via these funds or directly the cash will be used to support State investment, including in key infrastructure like housing, water and energy.
This will increase the political pressure on the Coalition to boost investment – though here the problem is more speed of delivery and the ability to get projects moving than available cash.
It will inevitably also play into the debate about how generous the budget in October should be, even though as a once-off receipt it should not go to support ongoing spending or tax reductions.
The Government is arguing that the Apple judgment relates to a legacy issue, with a statement saying it is “now of historical relevance only”. Ireland has signed up to international tax treaties in the meantime, it says, and has introduced rule changes, including in the areas covered by the judgment which relates to how companies allocate profits and where they pay tax. Tax experts say that international tax rules and the structures used by companies here have also changed significantly as a result, meaning it should not have any impact on the existing Irish corporate tax system, though the ruling will revive criticism of the way Ireland has operated over the years. It looks unlikely, given the time gap, that other historic cases in Ireland might be pursued by the commission, though not impossible.
Even if the tax arrangements used by these companies are now different, the core issue remains how they allocate costs and profits around the world, in particular in relation to their intellectual property, which is the patents, copyrights and licenses at the heart of their business.
The court’s verdict that Ireland broke the rules and offered illegal State aid to Apple is embarrassing. And it is likely to refocus international attention on the massive tax payments of big US multinationals here and how these companies structure their activities.
The irony is that the big changes in international tax rules introduced in part due to the original Apple controversy played to Ireland’s advantage, with indications that again this year big payments by this very company are one of the reasons why corporate tax receipts are again way ahead of target.
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