TOMORROW MORNING, THE General Court of the European Union will deliver judgment in Apple and Ireland’s appeal against the European Commission’s €13 billion tax ruling.

Although the matter could eventually have serious implications for Ireland’s corporate tax regime, experts say that the ruling is just Round One of what could be a lengthy legal wrangle.

Whoever loses  — the tech giant and the Irish government on one side, or the European Commission on the other — is expected to appeal the decision to Europe’s highest court, the European Court of Justice, which could take up to two and a half years to deliver a final ruling.

That itself could have implications for Commission plans to crack down on low-tax member states with alleged sweetheart tax arrangements for multinationals. 

Domestically, politicians have been piling pressure on the government to forgo another appeal if it loses.

Highlighting the €8 million that the case has cost the State in legal fees, Solidarity People Before Profit TD Richard Boyd Barrett said today that not taking the Apple tax money would be “a form of economic treason” in the context of the Covid-19-linked recession.

Even a member of the government, the Green Party’s finance spokesperson Neasa Hourigan, has questioned the need for a second appeal.

Regardless, the consensus is it that the government will file an appeal in the event of an adverse finding.

Aggressive tax planning

The European Commission, the executive branch of the European Union, has long been keen to crack down on “aggressive tax planning” by multinationals and the governments that facilitate it.

Ronan McCrea, professor of constitutional and European law at University College London explains that because of its low corporate tax environment, “Ireland is a member state that is politically invested in one side of the debate about whether the EU should have more powers over member states’ taxation policies”. 

But the Commission has one major obstacle in its path.

“It’s very difficult to get any legislation on increasing EU tax powers through the EU legislature because it’s subject to unanimity and member states like Ireland will veto it.

“So, if the Commission wins today and it’s supported by the European Court of Justice down the line, the EU will be getting, indirectly, without passing any new legislation, greater control over taxation. So that could be politically important.”

A lot has to happen before then.

After tomorrow’s judgment, either side will have a little over two months to file an appeal to the European Court of Justice on a specific point of law.

McCrea explains the process:

“Normally, if it’s not seen as an urgent case, which this isn’t — urgent cases usually have to do with people being in prison or things like that — it goes to the Court of Justice,” he says.

“There are then two stages in the Court of Justice ruling. There will be an opinion of the Advocate General, who’s a member of the court but not a voting judge. That will be an opinion about how the court should rule, and then the court will issue a decision later, sometimes months later.

“In general, the whole procedure takes around 18 months. Sometimes longer.”

So will today’s ruling have any impact on the taxation debate at all?

McCrea thinks so.

He says that if, for example, the Commission wins today, it could increase the pressure on countries like Ireland to make changes to their tax policies even before the Court of Justice has its final say on the appeal.

McCrea explains, “Even if we’re waiting a year and a half but we know that the initial decision was in the favour of the Commission, that probably would change the political complexion a bit.

“So, if the Irish government think it’s more likely that the EU will get these powers [after a Court of Justice ruling], then maybe they’re more willing to come to a compromise solution rather than risk losing fully on this issue.”

On the other hand, McCrea says that an appeal could slow any Commission plans to introduce new legislation to harmonise tax across the bloc.

“Passing legislation in the EU takes a long time,” he says.

“First you have to consult the member states then the legislation has to go to the Council of Ministers, and the European Parliament. By the time it comes into force, the Court of Justice might not have ruled yet and then it might rule that the legislation can’t be passed.

“So they might want to wait for a definitive ruling.” 

Illegal benefits

Tomorrow, the General Court will determine whether two tax rulings delivered by the Revenue in 1991 and 2007 allowed the company to funnel profits through Irish-anchored structures without paying tax in any jurisdiction.

It will be the first legal ruling in a case that formally kicked off in 2014 when the Commission opened an investigation into the matter, which concluded in 2016.

It found that the two rulings had breached EU state aid rules designed to prevent individual companies from receiving favourable treatment from member state governments. As European Commissioner for Competition Margrethe Vestager put it at the time, “Ireland had granted illegal tax benefits to Apple”.

Ultimately, after concluding that Apple had been paying corporation tax at an effective rate of just 0.005%, the Commission ordered the US company to hand back €13 billion in unpaid tax and over €1 billion in interest payments to the Irish government. 

Shortly after the ruling, the company appealed it to the General Court of the EU. For its part, Apple roundly denied that it had ever sought special deals with any government and accused the Commission of selectively quoting “tiny figures”. 

Controversially, the Fine Gael minority government at the time, backed by Fianna Fáil, decided to join the appeal.

As McCrea explains, one of the reasons why the government was so keen to effectively hand back the money was so foreign companies “know that Ireland is fighting so they can keep the arrangements that they have.”

Multinationals that might be considering investing in Ireland “want to know that those arrangements won’t be unpicked at a later date”, he said.

Labour Party leader Brendan Howlin also supported the decision, which Sinn Féin, Independents4Change, Solidarity-People Before Profit and the Green Party opposed.

The government and Apple’s appeal was heard by the court over two days last September.  

Sources say that a one-page summary of the court’s judgment is expected at around 8:30 am tomorrow morning.