Ireland will appeal against the European Commission’s ruling forcing it to recover billions in back-taxes from Apple, the country’s Finance Minister Michael Noonan said Tuesday as he sought to defend the country’s tax system.
“Now the commission has reached a filing, we have the right to appeal it,” Noonan told CNBC on Tuesday.
The European Union’s legislative arm, the European Commission, ruled on Tuesday that Ireland must recover up to 13 billion euros ($14.5 billion) – plus a hefty amount of interest – in “illegal tax benefits” from the U.S. tech giant.
Noonan said he disagreed “profoundly” with the decision and that Ireland would contest the ruling.
“We stand by the legitimacy of what was done in the past … we think the Commission is getting involved in what is the competence of sovereign governments in Europe…. This is an approach through the back door to try and influence tax policy through competition law,” he told CNBC.
The ruling comes after an investigation led by Europe’s competition commissioner found that Ireland had given Apple an unfair advantage compared to other companies in breach of EU state aid rules.
“The European Commission has concluded that Ireland granted undue tax benefits of up to 13 billion euros to Apple,” the commission said in a statement Tuesday.
“This is illegal under EU state aid rules, because it allowed Apple to pay substantially less tax than other businesses. Ireland must now recover the illegal aid.”
‘Full amount of tax paid’
Noonan restated Ireland’s position “that the full amount of tax was paid in this case and no state aid was provided.”
“The Irish Revenue don’t do deals,” he told CNBC. “They issue opinions to clarify a tax situation for individual companies but we never to deals. They have to apply the tax law… without fear or favor.”
Apple employs 5,000 people at its European headquarters in Cork, Ireland. Two tax rulings by Ireland had allowed for a complicated tax arrangement for Apple that the commission said effectively meant the company paid a tax rate of between 0.005 percent and 1 percent.
This is far lower than Ireland’s already comparatively low corporate tax rate of 12.5 percent.
Eager to maintain the country’s attractiveness to foreign firms, Noonan said in a statement that it was now “important that we send a strong message that Ireland remains an attractive and stable location of choice for long-term substantive investment.”
“Apple has been in Ireland since the 1980s and employs thousands of people in Cork. The company has continued to expand its operations in Ireland in recent times,” he added.
The commission said that the tax treatment in Ireland “enabled Apple to avoid taxation on almost all profits generated by sales of Apple products in the entire EU single market. This is due to Apple’s decision to record all sales in Ireland rather than in the countries where the products were sold.”
The commission added that if other countries were to pursue Apple for more tax on profits, this would reduce the amount to be recovered by Ireland.
Noonan added that it was the U.S.’s responsibility to deal with so-called tax inversions by U.S. companies — whereby firms relocate their legal domicile to a country with a lower tax rate, while maintaining the bulk of their operations in the first country in an attempt to slice their tax burden.
Ireland’s low tax has made it an attractive spot for alleged tax inversions, particularly among pharmaceutical giants.
“We don’t invite U.S. companies to come to Ireland on the basis of inversion and we don’t welcome them when they do but under international law we cannot stop them… it is a matter for U.S. authorities to change the law,” Noonan told CNBC.