EU State Aid Rules - Investigation into Preferential Tax Rulings: European Commissioner for Competition

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the joint committee. However, if they are directed by it to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or an entity by name or in such a way as to make him, her or it identifiable.

I welcome the European Commissioner for Competition, Ms Margrethe Vestager, and her colleagues. She may make her opening statement.

Ms Margrethe Vestager

I thank the members of the joint committee, especially the Chairman, Deputy John McGuinness, for inviting me. This year we will celebrate the signing of the Treaty of Rome 60 years ago. Competition rules, including state aid rules, have been part of the treaty from the very first day. I have the privilege of dealing with legislation dating back to the very early days of the European Economic Community, now the European Union. The reason it goes back so far is that the founders knew that there could not be a successful single market without a level playing field and fair competition. They knew that without state aid rules, companies based in smaller countries might find it difficult to compete if they had to compete with companies from bigger countries with deep pockets which would be willing to let taxpayers to pick up the bill. Every small country realises it cannot hope to win a subsidy race against bigger countries. When Ireland and Denmark joined the European Union in 1973, they entered an organisation which they knew would give small countries a fair chance of making it. The founders also knew that without state aid rules, governments would be able to use subsidies and special tax breaks to create barriers between countries. State aid rules have helped to make the Single Market what it is - an open and fair market. Efficiency, skills, innovation and tradesmanship decide if a country makes it. They are the keys to success. Ireland which has a highly educated workforce and a welcoming business environment has understood better than any other country during the decades how to turn membership of the Single Market into prosperity and economic well-being.

In these days, I think that we all, at least I do, feel the uncertainty coming from the political situation, in particular Brexit. I do not think that it can be in doubt that the Single Market, with 27 strong members in it, will continue to be the basis of our prosperity, because the Single Market is the jewel of our co-operation. It must not only be, but also remain and develop, as a market where small, medium and big companies compete on equal terms and are being treated equally as well as the countries whose flags they carry. This is why enforcing state aid rules is as important today as it was when the treaty was signed when it came into force almost 60 years ago.

Our decisions on tax rulings are being appealed by companies and Governments involved, so it would not be appropriate for me to go into the details of the legal arguments at this point. This is now before the European courts. I am very glad to have this chance to explain how we have gone about our work on aid and tax rulings. The European courts made it clear back in the 1970s that preferential tax treatment could be state aid in the same way as grants given in cash because both undermine the level playing fields by giving companies benefits that are not available to other companies. The Commission gave guidance back in 1998 on when corporate taxation can lead to state aid and the European court confirmed in 2006 that dealings between group companies had to be on market terms to avoid state aid. The rules on state aid and special tax treatments have been clear for quite some time.

What has changed recently is that multinational companies have been pushing the boundaries of aggressive tax planning. Since that came to light, we have investigated tax ruling practices all over Europe. Our investigation into the Irish tax rulings began in 2013 after Apple told a US Senate hearing about what it called a tax incentive arrangement with Ireland. That gave reason to ask questions here in Europe and also started the Apple case. Now our work on tax rulings has gone far beyond the Apple case and far beyond Ireland. We have asked every member state, big as well as small, for information on tax rulings and we have followed up with in-depth investigation in the most serious cases. This investigation has been carried out with the full involvement of the companies and the governments concerned. They have led to four decisions so far involving aid to Fiat in Luxembourg, to Starbucks in the Netherlands, to a number of large companies in Belgium, and to Apple here in Ireland. Those decisions should help the Single Market to work better by giving all companies, big and small, a chance to compete on equal terms. We will continue our work to make sure that there are effective deterrents against corporate tax planning practices that are against state aid rules.

That being said, two things are important. First, tax rulings are completely legal. We hold nothing against tax rulings as such. They can give companies the clarity that they need and they can tell them how certain tax rules are being applied. The only thing we want to ensure is that they are not being used as a tool to give selective advantage, for example to rubber-stamp a way of allocating profits that do not match economic reality.

Second, these cases do not mean that the Commission is claiming authority in tax matters as such, internationally or nationally. That is not our business. Ireland has the sovereign right, like any other member state, to determine its own corporate tax system and set its own corporate tax rate. What we are dealing with is special treatment for certain companies. Fighting aggressive tax planning practices should make countries such as Ireland and others an even better place in which to invest. Ireland has a highly skilled workforce and very modern infrastructure, just to mention two of its benefits. It has chosen, as is the sovereign right of the Irish Parliament and Government, to set a low corporate tax rate. Enforcing state aid rules means that Ireland and other member states can also offer a place in the Single Market that is open and fair at the tax rate they decide to set.

I hope I have not wasted members' time or spoken for too long. I am very happy to have had the chance to make this opening statement. I look forward not only to taking members' questions but also to hearing their points of view. I may be even able to answer some of their questions, but that remains to be seen.

I thank the Commissioner. I ask members, Deputy Michael McGrath and others, to stick to the same speaking time arrangements to which we agreed for one of our meetings last week.

Five minutes or thereabouts for each speaker.

I welcome the Commissioner and her colleagues and thank her for accepting our invitation. She said this morning and previously - we also heard this from other Commissioners and spokespersons - that the European Commission respected Ireland's sovereign right to determine its own corporation tax system and that she saw this very much as a separate issue in the application of state aid rules, but I put to her the suspicion among many, but not all, representatives in Ireland - they include me - that those rules are being used as a veil to undermine Ireland's corporation tax system. I say this because I look at what the Commission as a whole is doing. Only last week the Commissioner's colleague, Commissioner Moscovici, was here selling the virtues, as he saw them, of the common consolidated corporate tax base, CCCTB, whereby the way taxable profits were calculated would be determined under new rules, the allocation of profits across countries would be determined at EU level and Ireland, for example, would not be allowed to have three tax rates. From my point of view, in the context of this debate, there is a strong suspicion that there are elements within the Commission that are seeking to undermine Ireland's corporation tax system.

On the state aid finding and the issue of selectivity, I want to ask the Commissioner about how the Commission reached the conclusion that the Revenue Commissioners had applied selective treatment to Apple which was not available to any other company operating in Ireland. That was the only basis on which it could have reached the conclusion that there had been the provision of state aid, that it was selective, preferential and not available to anybody else. Can she tell us how the Commission reached that conclusion and how it compared, for example, the treatment of Apple with that of other companies?

Ms Margrethe Vestager

First, the principle is very important because there needs to be a watertight decision on state aid. Basically, we look backwards to see what happened in the past. Sometimes we look forward when a state aid scheme is notified to us and approval given, for instance, where it is to support renewable energy projects or the roll-out of broadband in rural areas, but otherwise, as in these cases, we look backwards. We are doing this under legislation that was included in the treaty almost 60 years ago. If anyone wants to change the tax system in Europe or a European country, it is done through the front door at the Council.

The Parliament would be heard but it is for the Council to decide. It has to be done by unanimity, which means the Irish Government has its full right to take whatever position it wishes on the legislation proposed. My colleague, Mr. Pierre Moscovici, appeared before this committee and I should not repeat why the Commission tabled the proposal on a common corporate tax base, public country-by-country reporting and the lot. The state aid control goes back decades. The first guidance was give back in 1998. It has been approved by the courts in 2006, long before there was any movement on European tax matters as such. It is not for the Commission. It is for the member states.

The second point I want to add, one aspect I very much admire, is the fact that Ireland is very much leading when it comes to the implementation of the OECD work to make a more global tax community. That is very much appreciated and it does not question the sovereign right of the national authority to set its own tax system either.

The question of selectivity is very important because if there is no selectivity then there is no state aid. That is one of the four criteria for us to use when we look for state aid. The point about the tax ruling is that it is, by nature, specific. It is a ruling that is directed exactly to the company asking for the ruling and it is only applicable to the company which has the ruling. That is why, by nature, when one finds a tax ruling there is selectivity. That does not necessarily lead to the fact that there is also illegal state aid because then other criteria must be fulfilled.

With respect, Ms Vestager did not answer my question about the basis for her conclusion in this particular case that there was selective treatment that amounted to state aid. As the Commissioner has acknowledged, every tax ruling or, as we call them in Ireland, "advance opinion" from the Revenue is based on the particular circumstances of the case. In the case of Apple, one had two non-resident companies and the apportionment of profits between the Irish branch and head office. Without comparing how Apple was treated by way of an advance opinion vis-à-vis a whole host of other companies, how could the Commission conclude that it was selective, it was preferential and it amounted to state aid? I suggest the bar of evidence one has to meet to reach that conclusion is a very high one indeed. I certainly have not seen the evidence, in what the Commission has published to date, to back up that.

Ms Margrethe Vestager

It is not for us to proceed today on whether one finds the evidence sufficient; the lawyers will do that in court. When one looks at the two tax rulings on Apple Sales International and Apple Operation Europe, one finds that the tax rulings will give the specifics as to how to allocate profits. This is what they do, and what we have been doing is to look into this tax ruling to see does this make sense and what does that in the tax ruling actually mean in economic sense as to where the profits are recorded. This is specific to Apple because what happens is that Apple does not pay the 12.5%, which is the corporate taxation rate in Ireland. That is what makes the case and the tax ruling selective. They are selective by nature and what one sees in the tax ruling is that this is specific to the situation of Apple to allow the company to pay a different amount of tax because of the very nature of the methodology in the tax ruling.

How does the Commission know that dissimilar methodology and characteristics were used by the Irish Revenue in issuing advance opinions to other multinationals that operated in Ireland? Ms Vestager is saying it was particular to Apple but she is not backing that up by giving the evidence that it was unique. How does Ms Vestager know it was unique?

Ms Margrethe Vestager

We did go through rulings for other companies and their branches.

If one looks at the public decision from page 107 to page 112, one will find we have gone through a number of rulings and that they are different because they are particular to the company involved.

It is a different interpretation from the one we have. One element many people found strange, if not bizarre, in the Commissioner’s finding was that she put an overall - mouth-watering - figure of €13 billion plus interest owed to the Irish State in back taxes. Equally, she dangled the carrot to a whole host of other countries in Europe by saying if they believed they should have been entitled to some of that tax, then they could claim it. Will the Commissioner elaborate on that logic of reaching a finding that Ireland is owed €13 billion plus interest but, equally, acknowledging it may not be that at all because an indeterminate amount of it might be owed to other EU countries which might feel the profit should have been correctly taxed in their jurisdictions?

Ms Margrethe Vestager

First of all, it is not something they can feel. I recognise that people have sensitivities as to whether matters are right and wrong. What would be the case if a tax authority in a member state could prove the Apple operation in it had developed to be a way of working which actually would allow for profits to be recorded in that member state? If that would be the case, then there would be a taxable profit. If that is not the case, then it is not the case. What we could see from the Commission’s side and from the investigating we have done is that for profits recorded in Ireland, where we have questioned the way tax rulings worked, we have found there is no economic reality to back up the way those profits were recorded. The profits ought to be recorded where the work was actually to be done, namely in the branch. Accordingly, the branch would be taxed under the normal Irish tax rate of 12.5%.

Is the Commissioner repeating today that some of the tax the Commission believes is owed may not be necessarily owed to Ireland but to other member states if they calculate, based on their own tax systems, the taxes owed to them?

Ms Margrethe Vestager

It is not something we believe. What we are suggesting is that it could be the case if another national tax authority went into the numbers, the way Apple is organised and how its profits are being generated and reported. It will take the national authority of another member state to do the full job itself. The Commission does not share any information we have found in the investigation because some of it will not only be controversial but also, and most importantly, confidential.

Can I pick up on that last point? It was used by some to ridicule the judgment. The common phrase used was that we cannot be the tax collector for the rest of the world. In her 130-page report, the Commissioner cited two different member states - Italy was one and another which was not mentioned - which had already established that for a short time Apple’s profits were taxable in their jurisdictions. Is it just those two claims on the €13 billion or is it a case that most of the €13 billion could be claimed by other member states?

Ms Margrethe Vestager

I would not know that because, for obvious reasons, we have not redone the Apple organisation since we are not the tax authority and do not have the numbers of individual member states. We have not redone the Apple organisation or the value, creation and recording. My guess would be that a large majority of the unpaid taxes would be due in Ireland.

If we cut through the technicalities in the report, it seems hard not to arrive at the conclusion that the Commission does not believe this was simply a misunderstanding or a misapplication of procedure by the relevant authorities in Ireland. Does the Commission believe that this was a deliberate attempt by the Irish authorities to provide a tax advantage to this particular company in Ireland?

Ms Margrethe Vestager

We do not investigate the motives.

We do not point fingers. We do not say that this person or that person did something that they should not do. The lead of the case was what Apple said in the US hearing that it had a tax incentive arrangement with the Irish Government. I believe that may be the most neutral way of putting it. The very nature of state aid control is that we want to restore the playing field. There are no fines at all. There are no pointed fingers and no criminal proceedings. There is nothing of that. It is just about restoring the level playing field. That is why we want the recovery to be done. Therefore, we do not go into the motives of why it happened. That is not for us. If anyone else wanted to take that up, it is not even for us to advise on it.

I appreciate that. With regard to the selectivity, the witness looked at other advanced opinions from this State. How many in total were examined? Can the witness give an estimate?

Ms Margrethe Vestager

I think there were 14 companies in the decision. For a number of companies, there was more than one tax ruling.

With regard to other tax rulings that the Commission has looked at, the report stated there was no profit allocation study for the original tax rulings in 1991 and 2007. There was no profit allocation study or transfer pricing report associated with those tax rulings. Is that the same for other similar tax rulings the Commission has looked at?

Ms Margrethe Vestager

That is not to be said in general. I am talking about all the tax rulings that we have been going through. We have been going through a sample of a thousand tax rulings, most of them from Luxembourg, but from every EU member state that has an active tax ruling practice. When we go through these rulings, we sort them out into confirmatory rulings, transfer pricing rulings and financial rulings. When we look at the transfer pricing rulings, what we are looking for is whether they are backed up by documentation. When a transfer pricing ruling is done, one wants to see that the prices used approximate market prices. Otherwise, a stand-alone company that has do its input shopping on the market and sell its products on the market would be highly disadvantaged. Of course, this is what we are looking for. In a number of cases, we find that the work is very well done and that there are no concerns, no further questions to be asked and no strings attached. The thing in this ruling and the reason we reached the result we did was that we found that no questions were asked and there was nothing to back up the idea that the profits should actually be made in the headquarters.

There was a reference in the report to when Apple began to negotiate its tax liability in 1990. The Apple adviser said there was no scientific basis to the estimate of $30 million to $40 million, which would be the taxable base. In the Commission's examination of the further minutes, was any scientific basis ever provided to underpin that figure?

Ms Margrethe Vestager

As the Deputy said, we went through the minutes of all the board meetings of the headquarters. What was found was not what we were looking for. What we were looking for was evidence to support the idea that the profits should be recorded in the headquarters. We were looking for discussion about the management of IP and employees or anything of the sort. There was nothing of the sort because there were no employees, there were no premises and there was no one to manage the IP. That is why we write as we do that there was no economic reality to back up the idea that the profits were to be recorded in the headquarters. That is why it must be recorded in the branch, because the two were basically one and the same.

The risk and control.

Ms Margrethe Vestager


In making the judgment the Commission made, the witness was obviously conscious - I am sure it did not sway her opinion - that this was the largest company on the globe and that there would likely be an automatic appeal to come from it.

What checks did the Commission take to ensure it was on sound legal footing? Does the European Court of Justice, ECJ, judgment in the Santander case bolster Ms Vestager's opinion that the Commission is on sound legal ground in respect of the judgment it issued concerning Apple's tax liability?

Ms Margrethe Vestager

We go through things in an extremely careful way. For instance, we work through things from one side, then we try to see if it would look different if we entered the process at different stages. We use a panel of people who are not engaged in the case to ensure that we have engaged the devil's advocate to ask the questions one might not ask if one was working on the case. In these cases, the experience, not just mine from the last two and a half years but also previously, is that these cases will be appealed. Therefore, obviously we should prepare the case. It is also obvious in any other case because people who do not appeal the decisions should know that the work that has backed up and led to the decision is as qualified as if it were appealed, which is why we use the same procedures in every state aid case. Regardless of whether we fight, we look to see whether there is a probability that it will be repealed or not. In the meantime, we did the work. I think the goodwill case was decided upon and the Commission won the case.

The €13 billion or so must be recalculated by the Irish authorities so that they can arrive at a figure and very helpfully, the Commission has given an estimate of what that figure is. Revenue will have to recalculate it and must calculate the interest. There have been reports, for example, that the interest may be €1.5 billion. Others have calculated that it should be in the region of €6 billion if we were to use what exists in our own tax code. What focus will the Commission be placing on the calculation by the Revenue authorities in terms of the overall sum of back tax that is paid plus the interest portion? Can the Commissioner talk about the fact that there is a delay in having that transferred to an escrow account? Indeed, just last week the Minister for Finance put on the record of the Parliament, in an answer to me, that it is still under consideration as to whether an escrow account will be used and that the details of that escrow account will be confidential, which means we may not know for a long period of time what is the figure that goes into the account, if it does so at all.

Ms Margrethe Vestager

In any state aid case, it is for the member state to do the final calculation. In the decisions, we provide a methodology as to how to do it but it is for the member state to do the fine tuning and to get every detail of the calculation right.

It is for the member state to recover unpaid taxes due to national legislation. It is for the member state to do that. We usually give a deadline of four months to do the recovery. In a case like this, of course, we acknowledge that it may require more consideration because there is a very large sum to be recovered. We have been working with the Irish Government, and I see progress in the case, which of course we appreciate. Progress is happening, which is why we have taken note that we have passed the deadline but are making no fuss about it because things are progressing.

The details of the escrow accounts, since it is all through national legislation, I will leave to the Minister for Finance.

I thank the Commissioner for her attendance with her team and for responding to our invitation. I will continue on from Deputies Michael McGrath and Pearse Doherty. Would it be fair to say that this particular ruling is not so much about the Irish tax system and the Irish tax code but was instigated by the US Senate hearing and is specifically about investigating and looking at Apple?

Is this really all about Apple and not about the Irish tax system or rate and how we attract and retain foreign multinational companies?

Ms Margrethe Vestager

I do not want to disagree with the Senator but I swore on the treaty. I put my hand on the treaty in front of 37 judges to say I will protect the treaty. There are many things in the treaty, my work to control state aid but also the sovereign right of the member states to set their own tax rate. If that is to be changed it will be by unanimity in the Council. I swore that. I take it very seriously. I hope the committee can see that we keep things apart. State aid control is completely different from how a member state organises its tax system. I do not think this will change. I do not think we will become a tax union where we have the same corporate taxation everywhere. Maybe it is a good thing that there is still some competition on the tax side. I would appreciate, however, that businesses paid what the country decided, in the Irish case 12.5%, instead of far less for some selected companies.

Can I conclude from Ms Vestager's response that this is not a question of the tax code but of Apple? The ruling was on Apple, the Commissioner was examining Apple. In respect of the selectivity argument that Apple got a better deal than anybody or everybody else, how many other corporations or entities were examined? Ms Vestager referred to 14 and there are references in the report to either nine or 11 specific cases, although they are not named. Were hundreds of cases examined to get an understanding of what happens in Ireland and how we attract, retain and manage our relationship with foreign direct investment companies?

Ms Margrethe Vestager

Of course in the public version of the decision the reader does not see the names of the companies. In order to establish selectivity we consider tax rulings, which are by nature selective, and we consider what is in the ruling which is specific to the company because it deals with the company in question. Then we try to get a fuller picture and deeper insight by examining how this happened for others. In the decision we say very directly there is in the Irish tax code a corporate taxation level of 12.5%. There are some derogations. We have been considering it from both sides and found that even if we take the general tax code as a reference system or go via the derogation we find the same thing: Apple had a selective advantage which was not open to other countries because of the details of the tax rulings. We found when we went through all the tax rulings for companies and their branches-----

I do not want to cut across Ms Vestager but how many other companies were examined, hundreds or very few?

Ms Margrethe Vestager

Ms Cousin says it was 19 in total in Ireland.

Only 19 corporations were investigated to compare with Apple.

Ms Margrethe Vestager

One does not compare with Apple because the starting point is that there is selectivity due to the fact that we are dealing with tax rulings. The neighbouring company cannot use the tax rulings Apple has got. That company cannot ask for a copy and ask to do it the same way because it is specific. That is why it is a tax ruling. The reason for going to other rulings is to understand whether this is the average way of using tax rulings or whether there are different ways of doing it. We have found there are different ways of doing it.

There are issues with Apple. Is it fair to say that the Commissioner does not have issues with the treatment of the other 19 companies?

Ms Margrethe Vestager

When we do these cases, we are trying to find the extreme examples. We have been going through quite a number of them. As the committee is aware, we are still asking questions but we have no open investigations. Of course, it is difficult to make predictions, especially about the future, as we say in Danish. Therefore, I do not know what the position will be in two years or during the next mandate of the Commission. At this stage, we have no open investigations.

I wish to tease out the argument about economic reality or the lack of such a reality in terms of the figures. If I understood her correctly, the Commissioner seemed to be saying that the figures did not have economic reality or that there were no employees, transactions or manufacturing activity. Moreover she seemed to say that moneys relating to other jurisdictions are flowing through Ireland. If there is no economic reality to the original figures, why do we have economic reality relating to the tax involved? If we take the position that the activity does not belong to Ireland, why is the Commissioner suggesting that the tax ends up belonging to Ireland? Let us suppose an Apple product is made in China and sold in Singapore. Perhaps it was booked through Ireland without any great activity here. It appears that we are now saying that the tax is due in Ireland, or that it is at least potentially due to be collected in Ireland. We have heard the argument from Deputy Pearse Doherty about how it may be subsequently sought by other countries. Will the Commissioner expand on the economic reality argument, please?

Ms Margrethe Vestager

Under the tax ruling, it is a question of allocation of profits. It is a matter of where they should be reported; whether at the headquarters or in the branch. What we find is that it cannot be that they could be recorded in the headquarters, because the headquarters did not have any employees or offices. This is why it should be recorded in the branch.

We do not question or investigate how Apple organises itself. That is a matter for Apple and we do not question that. Apple has organised itself in a way such that Apple Sales International and Apple Operations Europe have a cost-sharing agreement with Apple Inc. This means they pay for the development and research. As a result, they report the profits generated from the sales in Europe, India, north Africa, the Middle East and Ireland. We do not question that because it is how Apple set it up.

I welcome the Commissioner. On 19 December our Department of Finance issued a statement setting out some clear and unambiguous views relating to the ruling or interpretation of the Commission. I will quote from the statement in the context of the various entities, including Apple Inc., Apple Sales International and Apple Operations Europe. I am trying to distil this for people who may not have technical knowledge, for example, ordinary citizens who are watching the proceedings. On 19 December the Department of Finance stated that the Commission's decision:

The Decision also mischaracterises the activities and responsibilities of the Irish branches of ASI and AOE. These branches carried out routine functions, but all important decisions within ASI and AOE were made in the USA, and the profits deriving from these decisions were not properly attributable to the Irish branches of ASI and AOE.

How does the Commissioner respond to that contention from our Department of Finance?

Ms Margrethe Vestager

We have good courts and they will oversee the proceedings. I do not think that we should re-enact them. Indeed, it is not a re-enactment because it has not happened yet. In any event, I do not think we should try to do this work for them. At least, I would not be playing my part very well if that were the case because I am not a lawyer. However, I can say how it looks from my side. We did not investigate how Apple organised its operations. We did not investigate the cost-sharing agreements. We did not investigate the fact that Apple records its profits in Cork, Ireland.

We were looking at whether the allocation of profits was recorded in the branch and whether, therefore, it had to be taxed in Ireland, or recorded in the stateless headquarters and, therefore, not to be taxed in Ireland. We found that the recordings by Apple, which we did not question, could not be supported by economic activity. That is why they ought to be recorded in the branch of the company that is taxable in Ireland.

Okay. In the Commission's contention, where is the intellectual property generated?

Ms Margrethe Vestager

We do not investigate or value the intellectual property. We have not done that here. We have seen that Apple has organised itself with what it refers to as a cost-sharing agreement. This means that most of the research and development takes place at the Apple Inc. facility in Cupertino. Apple Sales International and Apple Operations Europe, which are based in Cork, pay a sum for that work. This allows them to use the intellectual property and to record the profits coming from Apple sales in Europe, the Middle East, India and north Africa.

How does the Commissioner respond to the view that Apple's intellectual property licences to the Irish branches of Apple Operations Europe and Apple Sales International are not consistent with Irish law? That is the view of our Department of Finance.

Ms Margrethe Vestager

Irish law might have an issue with the way Apple sets up its operation, but that is not what we investigated. We looked at how Apple is organised and at the Irish tax system. We took those two things as a given. Our investigation was limited to how the tax rulings allocated the profits and whether the profits were to be recorded in the taxable branch or in the non-taxable stateless headquarters. We found that the profits were to be recorded and, therefore, taxed in the branch.

I would like to return to the issue of tax liability. The Commission has not been silent on the question of whether other member states or other countries have a call on the magical figure of €13 billion. What are the modalities the Commission is proposing for Ireland to set up a system for other countries to come calling for that €13 billion or a portion of it? I would like to examine the statement the Commissioner made to this effect - if I understood her correctly - when she said other countries might have a call on the €13 billion. I have listened carefully to what she has said as a Commissioner of the European Union about the importance of the Single Market. My view is that if the Commission is to make such a statement, it must also have a view on how other member states are to collect this money, if that is what will transpire in the final analysis.

Ms Margrethe Vestager

As we just went through, I very much respect the fact that national tax authorities, parliaments and governments set their own corporate tax levels. That is unquestioned. The national tax authorities do their own audits. It is not for the Commission to do these jobs. The only thing we said was that some national tax authorities might take an interest in how the activities of Apple have developed over the decades.

Then they could see if some value has been created and therefore should be recorded in this other member state. It is not for the Commission to advise or to do the job. It is only for it to say if national tax authorities would do that, they can do that. What we are talking about here is not a magic number of €13 billion but ten years of unpaid taxes. I do not know if national tax authorities will pick this up. That still remains to be seen.

I welcome the Commissioner. Will the Commissioner explain why this was announced out of the blue on 30 August last year? What was the reason for the timing of the announcement?

Ms Margrethe Vestager

Sometimes one wishes one was able to control everything. Unfortunately, we are not. In my experience most things are a combination of what one wishes to do and coincidences. We found that we were not done before the summer. There was also a lot of back and forth to make sure that the fine detail was as it should be. We finalised it over the summer and therefore took the decision just after the summer break.

Reading the report, the Irish authorities were back and forth to the Commission at the start of the year saying that they were not getting procedural fairness or the right of defence. It was unexpected by all and sundry. Was it in any way dictated by the American election? That was going very hard at the time, and there was talk that Apple and other companies that had money that had not been effectively taxed to date would be subject to discussions with the incoming President, whoever that was going to be. As it transpired it was Trump. Was it in any way dictated by that sort of talk?

Ms Margrethe Vestager

No. It was not.

Was the specific reason that the Commission went at that time, 30 August, purely that the work was complete?

Ms Margrethe Vestager

I have been discussing the case work, not in detail but on a principle level, with US legislators a couple of times. I have been there and met them. We have had very frank exchanges.

Did they make plain to the Commissioner or make reference to her that the US would be looking to collect taxes on such moneys from Apple and other similar companies?

Ms Margrethe Vestager

I am sorry. Could the Senator ask that once again?

When the Commissioner spoke to the US authorities, she said that she spoke plainly and that there was a frank exchange. Did they make it known to her that they intended to take earned corporation tax from money, that is out there at the moment, that would be repatriated to America?

Ms Margrethe Vestager

No. The Americans have their own discussions about US tax reform. They are not for me. I am in no position at all to advise the Americans about how they would proceed with their tax reform. I have absolutely no say, nor has the Commission any say, as to when or how Apple might repatriate the profits that are not yet repatriated to the US and not yet taxed in the US. That is absolutely none of the Commission's business.

Section 25 of the Taxes Consolidation Act 1997 is the section under which this ruling with Apple was arrived at by the Irish tax authorities at the time. The Commissioner keeps saying that it is about state aid, but this particular section was available to be availed of by any multinational company. Under that particular section, any company is required to come up with a methodology on allocation of profits. It must seek a Revenue ruling. Apple sought a Revenue ruling on two occasions, in 1991 and 2007. The Commissioner agrees that the Irish tax authorities are effectively sovereign over tax policy.

It was open to any company to apply for the provisions of this section. How can the Commissioner argue that there was selectivity? Does the Commissioner accept that both Apple companies, Apple Operations Europe and Apple Sales International, were non-resident for tax purposes in Ireland under Irish law?

Ms Margrethe Vestager

This is not what we have been investigating. We have not been investigating the double Irish, which has now been discontinued.

The Commission has made value judgments on how intellectual property rights should be assessed, when in fact they are held in the US. At the same time, the Commissioner is saying that the Irish tax authorities have the sovereign right of dictating tax policy. There appears to be a contradiction in what Ms Vestager is saying. In one breath she accepts the sovereign right of the Irish tax authorities to effectively provide tax law, which they have done. Apple applied for tax rulings on the methodology for calculating the profits and then applied them. Ms Vestager accepts that both companies were non-resident for tax purposes under Irish law. She keeps saying the court will decide. She took a unilateral decision to publish her findings back in August 2016, and this has had repercussions for the Irish State, when on the face of it, it would appear that no Irish tax law or international tax law was broken, because effectively the companies were non-resident. Yet, something has been put out there that effectively does not appear to have legal foundation. It appears to be a value judgment on the part of the Commission.

The Senator is out of time.

I know, but this is very important. Does Ms Vestager believe that the Irish tax authorities have the wherewithal to collect taxes from a company when it has ruled that tax is not collectable under Irish law?

Ms Margrethe Vestager

We do not make value judgments, not in the moral sense and not in the sense of evaluating the intellectual property, IP in this case. We do not do that.

It looks as if Senator O'Donnell wants to interrupt me.

I fundamentally disagree. From reading the 130 page report, I fundamentally disagree.

Ms Margrethe Vestager

I got that point. To make absolutely sure that we disagree, I will give the Senator my answer. The reason we went through the tax rulings in these batches, under section 24-----

Ms Margrethe Vestager

-----yes, section 25 - was to see if there was a methodology, if it was in fact a scheme and not individual tax rulings, but we could find no methodology. What we could find was individual decisions with individual companies. It would have been another situation if we had found a methodology but we did not No matter how we looked at it, from section 21 or section 25, even with those two different approaches we still found the selectivity by the fact that Apple did not pay the tax rate decided by the Irish Government and Parliament of 12.5% on profits that were to be recorded in the branch and therefore to be taxed in Ireland.

A final point-----

No. I call Deputy Murphy.

I thank the Commissioner. In general I am not a fan of the European Commission. However, the Commissioner plays a very useful role in this area because she can probably understand and see from the questions that, politically, the ruling caused the Government and the Fianna Fáil Party a lot of difficulty to explain the rationale for using public money to fight the case and not to have €13 billion in taxes owed to the Irish people collected.

It was a political problem for them and so we had an immense campaign of disinformation and misinformation by the Government in an effort to confuse the issue. The Commissioner has been able to bring some clarity and light to the situation.

Is it a fair interpretation of the ruling to say that Apple effectively, in communication with the Irish Government, arrived at an agreement about how much tax it would pay and then the tax system was reverse engineered to arrive at that amount?

Ms Margrethe Vestager

I cannot answer that because that is not what we have investigated. That I do not know.

I will now move on to the arguments put forward by the Government, echoes of which Ms Vestager has heard today. One of the key arguments made by the Government is that none of this money is really owed to Ireland anyway and that by the time other European countries get their hands on their share and profits are repatriated to the US, there will be nothing left. Is it Ms Vestager's opinion that the large majority of the €13 billion, plus interest, would be owed to the Irish State rather than to other countries?

Ms Margrethe Vestager


Is it also the case, contrary to what the Government originally argued, that the money could be used, within the fiscal rules, for capital expenditure and would not have to be spent on paying down the national debt?

Ms Margrethe Vestager

I would not argue with the Irish Government and the fine print of that is for one of my colleagues who will interact with the Irish Government on such macroeconomic issues. There are various nuances to that which will eventually form part of a discussion with the Government.

The Government tried to claim that even if we got the €13 billion we would have to spend it all immediately on paying down the national debt under the fiscal rules. That is simply not accurate, no?

Ms Margrethe Vestager

I would not know if it is accurate because I have not studied it in detail. My personal point of view is that paying one's debts is a good thing.

It depends on whether they are really one's debts or those of European banks that were foisted on one by the Commission through the ECB.

Ms Margrethe Vestager

At least they are not mine.

Another key argument was that Ireland could not be expected to be the world's policeman on tax. How could Ireland collect taxes for the entire world? Is Ireland being asked to be the world's policeman on tax?

Ms Margrethe Vestager

No. What we have been looking into, as I have said, is the allocation of the recorded profits. Are they to be allocated to the headquarters of the company, which is not taxable in Ireland, or to the branch, which is to be taxed in Ireland? Apple Inc. is a huge company. It makes profits in many other places besides Europe, the Middle East, India and North Africa, the places for which the profits are recorded in Ireland. It is for other tax authorities to deal with that, not for the Commission or for the Irish tax authorities. Whatever happens in the US tax system is not for us to know or to make a prognosis on. This is a strictly Irish business in the context of upholding our common state aid rules and the Irish tax system at the same time.

There was a particular moment, a well-crafted and smart moment, when the Irish Minister for Finance, Deputy Michael Noonan, picked up his iPhone, turned it around and pointed out that it said designed in California and manufactured in China. He claimed that this meant that any profits accrued were not owed to Ireland. Ms Vestager probably knows that we recorded a growth rate of 26% in one year, the so-called leprechaun economics. We had an increase in corporation tax receipts of in excess of €2 billion in one year, more than €1 billion of which was directly attributable to Apple. Is it not logically inconsistent for the Government on the one hand to take the extra tax from Apple because of the winding down of the double-Irish and the European Commission's investigation while on the other hand to argue that this tax is not actually owed to Ireland?

Ms Margrethe Vestager

That is a perfectly fine discussion to have with the Irish Government.

She is too good for Deputy Murphy.

I shall quote from Apple's 10-K form for the tax year ending September 2015. It notes: "Substantially all of the company’s undistributed international earnings intended to be indefinitely reinvested in operations outside the US were generated by subsidiaries organized in Ireland." The way Apple has chosen to organise is that all of the company's undistributed international earnings are generated in Ireland. That means, to the extent taxes are owed, they are owed in Ireland.

Ms Margrethe Vestager

That is part of the point.

Ms Margrethe Vestager

Where profits are recorded here by a taxable entity, taxes are to be paid here. At the same time, as the Deputy will know, Apple has a large sum of money that is not repatriated to the United States. Part of that sum is to pay taxes. I think the provision is the equivalent of 14% of the unrepatriated profits, but that is a matter for the US authorities, not us, as state aid controller, and not for the Irish authorities.

Does the Commissioner think there are other corporations, presumably major multinationals like Apple, that have similar specific deals with the Irish Government?

Ms Margrethe Vestager

At least, to some degree, we know. As the Deputy will know, in the public version of the decision we analysed tax rulings from a number of branches. As he will also know, as there are no open investigations, we have not found sufficient reasons to be as concerned as we were in the Apple case to open cases. The nature of our work means that we ask questions. It is only when we open an investigation with a public statement - there is an opening statement and an opening procedure that eventually becomes public - that we have a true investigation. Before that, as part of our daily work, we ask a lot of questions. When we see something in the media, if people complain to us and unions, as they have done, make a comprehensive report, of course, we will look into it. Asking questions is our business and we try to find answers to retain our peace of mind. That is what we do. Sometimes one sees claims in the media that "They are asking questions about something, so now there is another case", but that is not necessarily the case. After getting the answers, maybe we are wiser and say, "Fine; we are not concerned." On the other hand, sometimes we may be. As the Deputy might know, we recently opened a case against the French company Engie and the tax rulings in Luxembourg. We are also investigating McDonald's that also has received tax rulings in Luxembourg.

I, too, welcome the Commissioner. I ask her to repeat how this matter came to the attention of the Commission.

Ms Margrethe Vestager

Is the Senator referring to the Apple case?

Ms Margrethe Vestager

It came to the attention of the previous Commission because of questions asked and answered in the US Senate.

What about the 19 other companies the Commission has investigated? Were they just unlucky to be investigated by the Commission investigated because of the Apple case?

Ms Margrethe Vestager

We did not investigate them. We did not open proceedings and lay out our concerns. If we open proceedings, we first make a written statement in which we outline our concerns. We did not do this in the case of the other 19 companies. In order to understand what was going on and be sufficiently thorough, we asked them questions such as, "How does this work for you?" We have not opened investigations into them.

Would the Commission have opened investigations into some of them if they had been similar or the same as Apple?

Ms Margrethe Vestager

If we are in doubt or find that there is reason to be concerned, yes, we open a case.

Does the Commissioner have concerns about the United Kingdom leaving the European Union, specifically if it could provide state aid for companies and there was nothing the European Union could do about it? Is there anything it can do about it if the UK Government decides to provide massive state aid for companies that will decide to locate there for a year or two?

Ms Margrethe Vestager

It is very difficult to say anything about how the Brexit will work as we do not know what the outcome will be. We can indicate what we do in a number of other cases. The Single Market involves free trade and we trade happily with one another because we know that there is no company for which the taxpayer has picked up the bill, as that would amount to unfair competition. Wherever I travel, I promote the state aid control system. I did this last year when I was in China and will do so again when I get there. We want to have fair competition on it merits. It is based on how skilled, efficient and innovative a company is and what can be presented to its customers. That is why we also have state aid arrangements with Norway, the Swiss and the countries in the European economic area in order to have a level playing field. I do not know at this point what will happen in the discussions with the United Kingdom, but there are examples to show it is an ongoing concern for us to protect the level playing field.

There is a housing crisis in this country and five Irish developers have taken a case to the Commission with regard to what they believe is unfair competition with the bad State bank called NAMA. The case has been with the Commission for almost a year and a half. Will the Commissioner tell us when the case might be decided? Will she prioritise it as it could have an effect in dealing with the housing crisis?

Ms Margrethe Vestager

The case in which five developers have complained about NAMA is, of course, very important. If I remember correctly, the claim is that NAMA acquired its stock of buildings at a time when it could do so at very attractive prices as it was in the middle of the crisis and that now it can sell them in a way that makes it more competitive than the five complainants. We are still in the process of looking into the case. It is a very complex matter. Therefore, I cannot give a deadline as to when it will be decided. I will be happy to discuss it with the Government. If it wishes to prioritise the case, we can, of course, put more effort into it.

Therefore, it would be up to the Government to prioritise the case.

Ms Margrethe Vestager


My next question relates to regional airports. Knock airport is on the west coast. Does the State decide that state aid should not be given? The airport is making the case for 90% funding as its infrastructure needs investment and state aid rules cap such funding at 75%. Is it the member state or the European Commission which decides that state aid can be given to a regional airport?

Ms Margrethe Vestager

It depends on whether the government in question wants to give aid. If it does, there is the question of the size of the airport involved. We are in the process of passing a regulation that will enable and empower a member state to take more of these decisions by itself. As I said, it depends on the size of the airport involved and the number of passengers passing through it per year. It also depends on whether it is a business that does not need operational aid or if it is a particular scenario where an airport is needed for reasons of geography and connectivity. I am sorry, but as I do not know the details of the specific airport, I cannot answer the question. It would depend on the characteristics of the airport involved.

Who may approve a derogation? Is it the member state or the European Union that can grant a derogation to provide state aid?

Ms Margrethe Vestager

If it is a large airport that is involved, the member state must notify the Commission. We work with its government to be able to make a positive decision such that it would have a goal.

I thank the Commissioner for attending the committee. First, it is important we point out that Ireland is an active participant in the base erosion and profit shifting project and we have abolished the double Irish and the notion of stateless companies. Therefore, huge efforts have been made under the tax code over the past number of years. If the Government did not appeal the Apple tax case, is it not correct to say the €13 billion would not be available to the Government to spend because Apple itself has appealed the judgment and the moneys would have to be held in escrow during such time as the case is adjudicated on?

Ms Margrethe Vestager

Yes, the company can appeal the case just as the member state in question can. Then the appeal would have to take its course.

The money could not be utilised or collected by the Government in the interim.

Ms Margrethe Vestager

That is for the Government to decide, but if the company wins the case, there would be an issue to take care of.

It is very important that people realise that-----

Is Ms Vestager saying the Government could take the money and it would not have to go into an escrow account? I apologise for interrupting.

Ms Margrethe Vestager

It is not for us to decide in that situation; it is for the national government to decide.

If someone were not allowed to appeal a decision and moneys could be collected immediately, it would be an obvious denial of the right to natural justice. It is important that it is set out very clearly that when the company in question appeals this judgment, outside of government intervention, this money could not be utilised until such time as the appeal is finally ruled on by the European Court of Justice. This is very important for everyone involved in the debate. That is now clarified.

Ms Margrethe Vestager

First things first: whether or not the case is appealed and no matter who appeals it, the recovery must take place, which is why it is important for us to see the progress in the work done by the Irish authorities to make the recovery. As I said before, recognising the difficulties and challenges in this case, because it is a large sum of money, what we appreciate is the progress; we are not too picky about the fact that the deadlines have passed.

It is very difficult to see under our primary legislation how the recovery can take place. The Revenue Commissioners' role is very clear. They are the impartial collectors of taxation in this country. They impartially adjudicate on the rules set out by the Oireachtas. Our legislation is very clear in this regard. If a company complies with legislation, completes its tax return in accordance with the law, which in this case it has in accordance with section 25, and has got an advanced opinion from the Revenue Commissioners, who are the competent authority in Ireland, how can the Revenue Commissioners then in law collect money when it is very clear under legislation that they are precluded from doing so?

Ms Margrethe Vestager

I am not sure I fully understand the Deputy's question. It is for every member state to uphold national legislation and our common legislation at the same time. This is why if member states want to establish state aid schemes, they call the Commission and say they want to do so. Then, if state aid is involved, very often we discuss the scheme in order to take a positive decision to say "go ahead". We do this quite a lot when it comes to renewable energy, broadband roll-out in rural areas and that kind of thing. Then there is the legal certainty of having both the national legislation and our common legislation upheld at the same time and there is a decision to say this is the case.

Ms Vestager is therefore saying the Commission can supersede our primary tax legislation to do that. In other words, if under our current legislation the powers are not there to collect this sum of money, she is saying that, by the effective ruling of the Commission that state aid is involved, the money can be collected without our current primary legislation and that the Commission can supersede it. This is very important because it goes to the core of the issue of statements to the effect that the €13 billion is there for the Government to spend. The point of the matter is that advanced opinions were given on two occasions in accordance with the law and as available to any company in this State or outside it to apply to the Revenue Commissioners for a ruling under section 25.

It is very clear in this case that the Commission is questioning the Revenue by saying it conferred a selective advantage on one party when, in essence, it is available to all parties under the legislation, because anyone can apply for an advanced opinion. It is very clear how we in Ireland collect tax under our primary legislation and how the Revenue Commissioners go forward and collect it, if someone provides a return in accordance with the law and is up-front in their return. It is different if someone makes a false return or falsifies information, in that the Revenue can go back years and years. However, if someone makes a very clear, open return in accordance with the legislation, how does Ms Vestager propose that tax would be collected and has the Commission the powers to supersede our primary legislation in that case?

Ms Margrethe Vestager

Maybe I have got it now. On the one side, we have the tax system in Ireland working as the tax system should work in Ireland. At the same time, we have our common legislation on state aid saying that one cannot give a selective advantage to one company or a group of companies if it is not open to everyone. These two things have to be upheld at the same time. In the state aid legislation, we have the power to go back ten years to see if state aid has been given out and, if it is illegal, it has to be recovered. It does not change anything in the Irish tax code or how the tax authorities work if someone is behind in paying their taxes or something else which is completely within the authority of the national authorities. The two things have to be upheld at the same time but they come from different perspectives.

Ms Margrethe Vestager: Maybe I have got it now. On the one side, we have the tax system in Ireland working as the tax system should work in Ireland. At the same time, we have our common legislation on state aid saying that one cannot give a selective advantage or one company or a group of companies if it is not open to everyone. These two things have to be upheld at the same time. In the state aid legislation, we have the power to go back ten years to see if state aid has been given out and if it is illegal it has to be recovered. That does not change anything in the Irish tax code or how the tax authorities work if someone is behind in paying their taxes or something else which is completely within the authority of the national authorities. The two things have to be upheld at the same time but they come from different perspectives.

It is a huge issue because if any company comes to Ireland and requests an advance opinion from the Revenue Commissioners, we are now in a situation where investors cannot rely upon that advance opinion by the Revenue Commissioners, which is the impartial competent authority in Ireland. It is a very serious situation that the Commission is interfering in this regard.

We have several more speakers. How is the Commissioner for time? We said we would finish at 1.30 p.m. and we have gone well beyond that.

Ms Margrethe Vestager

We are running late but I would be sorry to leave questions hanging as that would be a little tricky. It is very important not to have things unclear, if I am clumsy in my responses. I want to make sure, at least from my side, it is absolutely clear that we do not interfere in how a national tax administration works. What we are saying is that, when we look at section 21 spelling out that the tax rate in Ireland is 12.5%, and go through section 25 to look at whether there is a methodology, we find no methodology and we find very specific and different tax rulings advising on the methodology on how to allocate profits if they are then to be taxed by section 21. The logic of state aid is to say that if one is using state resources, or letting go of or not having state resources, if it is selective or if it is beneficial, then it is state aid. It then kicks in that we have all obliged each other to go back ten years in time and recover the unpaid taxes. Those two things can exist at the same time. It is for the national authorities to make sure that both our common legislation and our national legislation is upheld at the same time in order to create the security the Deputy wants to have for investors in the future.

I thank the Commissioner for being with us today. To go back over a couple of things, is the Commissioner saying that if it were not for the US Senate hearing which exposed the tax incentive arrangement with Apple, there would not have been this investigation and we would not be here now? The Irish Government is saying this was part of a trawl through. Is the Commissioner saying it would not have happened and we would not be where we are now but for that Senate hearing?

Ms Margrethe Vestager

It is always difficult to redo the past and to do counter-factuals. This was opened before I ever became a Commissioner by my predecessor, Commissioner Almunia.

What I was told by the people who were present was that it was the questions and answers of the US Senate hearing that gave rise to questions being asked here and to the case being opened.

It reminds me of an appearance on "The Late Late Show" by a former Commissioner which gave rise to a lot of other stuff. People in the room will know what I am talking about. It depends on the position from which one is looking at this. One may say they did the State some service. Has the Commissioner tried to quantify the possible amount of state aid in all of the rulings and examinations she is carrying out at the moment? Is there an aggregate figure - even if it is not published - on what might be owed in state aid across the EU?

Ms Margrethe Vestager

No. It is not too scientific but we have some figures that give an idea of the legal state aid, which may sound strange. We do state aid control and we all talk about the provision of state aid but in Europe we give a lot of state aid. From the top of my head, in energy alone the state aid per year in Europe is €30 billion. There is a lot of legal state aid around. We do not have any figures for the illegal state aid. That is due to the nature of it. If it is illegal we usually do not know about it. We only know when we have taken a decision on the investigation that it was illegal and that there is a particular sum. The Apple decision is extraordinary in that respect. It is a very large sum, which reflects that it is a very large company. In the other cases there has been recovery of between €20 million and €30 million and in the Belgian scheme, it was €700 million.

Does the Commissioner believe that representatives of the State sat down with representatives of Apple and arrived at a figure for the amount of tax Apple which would pay and which was not based on any normal rules? Did her investigation - at any point - note any political influences in such arrangements?

Ms Margrethe Vestager

I do not know because what we are investigating is what actually happened and what was in the tax ruling. Does what was in the tax ruling give rise to a selective benefit to this company? That is what we are looking at. We are not looking at motives or at who did what and when. We are not pointing fingers. There are no fines in state aid control. What we want to happen is for the unpaid taxes to be recovered.

How many rulings on state aid and tax has the Commission made apart from this one?

Ms Margrethe Vestager

This is the fourth decision. We still have three open cases, in which we have taken no decision, on Amazon, McDonalds and Engie, the French company. I do not know - because I have not taken the decisions yet - what will come in the future. As I said, we have 1,000 rulings on our working table which we are going through mostly to get to know the nature of tax rulings. Six hundred of them come from Lux leaks and the others come from samples from all member states active in tax rulings. They are Germany, France, Denmark and almost all member states. The good news from that work is that a number of member states are doing a job that is well done. If it is a transfer pricing ruling, it is well documented. They document the price that is used, the approximate market prices, that no more questions are to be asked and no investigations to be opened.

Does the Santander ruling make Ms Vestager more confident that the ECJ will come down on the side of the Apple ruling? I want to ask the Commissioner a minor question about regional state aid when she has answered the question on the Santander ruling.

Ms Margrethe Vestager

Each case is different. We have to be thorough in every case. Even if we do not think it is probable that it will be appealed, there is the same right for the same thoroughness and quality in the case work. Since each case is specific, I take it case by case and try to make sure it is a job well done. It does not matter if we won or lost the last one, we do the best we can on the present one.

When does the Commissioner expect the ruling to be finalised on this?

Ms Margrethe Vestager

I do not know. It is for the courts to set their calendar.

On the matter of regional state aid, and continuing from what my colleague Senator Paddy Burke said, is there any impediment to any country using fiscal policy to address deficits in regional areas? Can a separate taxation be used for a region to address a regional imbalance through state aid?

Ms Margrethe Vestager

I would not know.

Okay. That is a conversation for another day.

Ms Margrethe Vestager

I would not know. I do not think we have any examples of that kind of regional difference.

I will write to the Commissioner separately on it because I appreciate that her time is limited today.

Ms Margrethe Vestager

Yes. The Senator is more than welcome.

I welcome the Commissioner. In a CNBC interview, she stated:

We never questioned how Apple is organized. We do not question Irish tax code, that is for the Irish.

Subsequently, on 30 August, Mr. Tim Cook of Apple wrote that, over the years, Apple "received guidance from Irish tax authorities on how to comply correctly with Irish tax law — the same kind of guidance available to any company doing business there". Did the Commissioner ask the question about how many opinions Revenue gave to other companies regarding that particular piece of legislation?

Ms Margrethe Vestager

How many opinions? I do not know. I think the interrelationship between Apple and the Irish Government is much better answered by either Apple or the Irish Government.

Not the Irish Government but the Revenue Commissioners. We are specifically talking about the Commissioner's investigation, which was not about the Irish Government, but the opinion from the Revenue Commissioners. Was the same opinion offered to other companies?

Ms Margrethe Vestager

The reason that we went through the tax rulings from 19 branches, which were also using the double Irish model, was to see if there was a methodology and if it was the same for all the branches as what we have found in the Apple rulings. We have found that it was not the same. There was no methodology. It was not the same for each and every company. It was specific.

The Commissioner is of the opinion that the majority of the €13 billion figure should be available to the Republic of Ireland. Is that correct?

Ms Margrethe Vestager

That would be our estimate, yes.

Okay. If Apple, in good faith, took the opinion of the Revenue Commissioners to be correct, and subsequently the Commission retrospectively applied the state aid rules, could Apple take a case against the Irish Government for those moneys, including tax unpaid, and potentially another case for reputational damage to the Apple brand?

Ms Margrethe Vestager

This is outside of my portfolio or what I work with.

Does the Commissioner have an opinion?

Ms Margrethe Vestager

I do not have an opinion about it. If it is the law that the company is able to do that, I would not know. I think that it can be seen in some of Apple's announcements to the public over the years that the company has been well aware it had a tax arrangement that allowed it to pay less tax than the 12.5% of the Irish tax code.

In his statement of last August, Mr. Cook noted that Apple took the guidance available from the Revenue Commissioners here and I can only assume the guidance was given in good faith. In those circumstances, Apple could take a case. I am asking the Commissioner if it is possible or even likely that Apple could take a case against the Irish State for the advice given by the Revenue Commissioners to the Apple company?

Ms Margrethe Vestager

The Deputy will get a better answer if he asks that question of someone who knows the insides of how these kinds of questions can be solved.

The Commissioner has spent a number of years on this case. It is the biggest case that the Commission has had. She is very well-placed to offer an opinion on it.

Ms Margrethe Vestager

No. I am not. My work is very specific. I also think that it is a little bit premature to guess about the outcome of the court case that is now ahead of us and what will happen afterwards. I have worked with this, but unfortunately that does not mean that I have a good answer to every question.

The Commissioner, like all Commissioners, was selected by her government to represent her nation in the Commission. Does she accept any responsibility for the EU failing in terms of there being anti-EU sentiment with respect to cases like this where the Commission is interfering in a nation's taxation sovereignty?

Ms Margrethe Vestager

I am not a Commissioner to represent my home country.

I understand that.

Ms Margrethe Vestager

On the contrary, I swore to do the opposite, that-----

I understand that also.

Ms Margrethe Vestager

-----I would take no instructions and seek no instructions in the work but protect the treaty, and I take the doing of that very seriously. It is up to everyone to decide what they find is reasonable, how they want the European part of the democracy to work and how they want law enforcement implemented. For me, the jewel of our co-operation is the Single Market. A level playing field and fair competition is what we expect of that Single Market. In enforcing the state aid rules, the merger control and the anti-trust work, we try to play our part in enabling businesses, big as well as small, to have a fair chance of making it.

The smaller countries do not get the same deals as the bigger countries.

Ms Margrethe Vestager

I think so. Equal treatment is very important.

That has not been happening.

Ms Margrethe Vestager

As I said, we have been asking every member state about how it does its tax rulings.

The Commission and the European Central Bank, ECB, insisted on Ireland paying bondholders in the past decade. There does not represent equal treatment for the smaller countries compared with the larger countries.

Ms Margrethe Vestager

I do not know the specifics of that and I do not know if there can be comparable situations. Ireland has been through perhaps some of the most difficult times of any member state in modern history in Europe. It is very difficult to compare the impact of that extreme situation not only on the Government and on the budget but also on the citizens of Ireland with anything else that has been going on in Europe.

My point is that we were forced by the Commission and the European Central Bank to pay the bondholders while the IMF was of the view that they should have been discounted. The Commissioner is a senior member of the Commission. The largest states get to do an awful lot more than the smaller states and the rules, as they apply, are not always applied equally.

I must call time for the Deputy on that question.

The Commissioner was going to answer that question.

The Commissioner has to move on from here. I call Deputy Boyd Barrett and I ask him to bear in mind that we are winding up the debate as the Commissioner and her colleagues are anxious to leave.

The Commissioner may have noticed that there is a very significant irony at play in this committee in that the political parties which were the most enthusiastic supporters of the European Union are most resistant to her findings in this matter and those of us who were most critical of the European Union are the most enthusiastic about her findings because some of us believe that there has been a facilitation of aggressive tax avoidance by multinationals operating in this jurisdiction.

As there seems to be confusion about what the Commissioner has concluded on this matter, for the purposes of clarity I will suggest a summary of what I believe she is saying. I must say that I agree with her. The essence of her conclusion on this matter resolves around the fact that profits that were generated by Apple in Ireland were allocated to a subsidiary of Apple that had no real economic existence. Is that essentially the case? Is that the essence of it? It is impossible to allocate profits to an entity that has no employees, no offices and that can show no evidence whatsoever of any economic activity. Is that the essence of what the Commissioner is saying?

If so, in Ms Vestager's questioning of Revenue did it explain how it had allowed the allocation of profits to such entities because I am confused as to how it could possibly have made that decision which Ms Vestager has questioned?

Ms Margrethe Vestager

I cannot clear up the confusion on the Deputy's part because we have not looked into that matter. As I said, we are not looking at the motive or who said what. We are looking into an organisation that is able to take risks, if it has the functions and assets, to actually make it economically sustainable to ensure the profits are recorded here. Some of the discussions become very technical - they seem legal for people listening to us - but it boils down to the fact that even in such complex cases there has to be an economic reality. If someone is generating a profit, someone has to work here, there has to be an office, there have to be functions and they have to be able to take risks. What we have found is that it exists, not the headquarters but a branch.

But the profits in the branch were not taxed where there was a real company. By the way, I fully agree. To me, it is cut and dried. Frankly, I do not see how anybody could mount a defence on that front.

The Deputy is being very compliant today.

Indeed. I want the €13 billion for this country.

I want to understand the nature of Ms Vestager's investigation. Did she question Revenue about its ruling or was it a paper investigation? Surely, as part of her investigation, she questioned Revenue in some shape or form about its ruling.

Ms Margrethe Vestager

What I am trying to avoid is becoming part of a discussion between Members of Parliament and the Government, or the then Government, about who did what and what the motive was because that is none of my business.

I am not ascribing motives and not asking Ms Vestager to give an opinion on motives. I am merely asking her if she asked Revenue the reasons it allowed the allocation of profits to entities where there was no economic activity.

Ms Margrethe Vestager

What we looked at was the result, at how the tax ruling worked. We have not investigated what happened before it - what it thought, what it said and what happened then. We have not held hearings. We have not talked to people about the matter. We have asked them questions on paper.

I will be quick because I am running out of time. Ms Vestager did not ask it why. Is it her understanding Apple asked for the particular ruling, that it proposed a particular ruling to the Irish Revenue authorities and that they said, "Yes, that is acceptable." Is that how it worked?

Ms Margrethe Vestager

When we ask questions about how it came into place, of course, those who answer our questions will come with their own justifications. We take the facts of the case and the evidence and make up our mind in order to be able to take a decision. That is how it works. That is why, to some degree, we have different roles. We come at it from the Commission's side in terms of state aid control. If there has been illegal state aid, we work with member states to engage in recovery. Committee members have other roles in representing citizens.

That was not my question. I was simply asking, from her investigation, if it was Ms Vestager's understanding Apple had asked for a particular ruling, to which Revenue agreed. I think she said that in circumstances where state aid might possibly have been given, governments or revenue authorities might ask the European Union whether a ruling had breached state aid rules.

Did the Irish Government or the Revenue, at the time when they made these rulings, ask any opinion of the European Union as to whether these rulings could possibly breach state aid? Following her ruling, does the Commissioner know if the Irish Revenue Commissioners are still calculating and allowing the allocation of Apple taxes to entities which the Commission has concluded they should not? In other words, is the practice continuing or has it changed?

Ms Margrethe Vestager

As far as I understand, in all these cases it is the company which asks for a ruling. It comes with its evidence and asks for a ruling which it gets. In this process, there was no notification of state aids. The two tax rulings are not in place any longer. There is a new arrangement for Apple. For the future, it is up to the Irish Government to ensure Irish legislation and our common legislation are upheld at the same time.

I thank the Commissioner and commend her on her work.

I am not a member of the committee and thank the Chairman for allowing me the opportunity to ask some questions.

Does the Commissioner accept that the 12.5% profits tax was applied to all manufacturing in Ireland by the company concerned? All the public commentary claimed Apple had paid no tax or a tax rate of 0.005%. It was claimed this was done by amalgamating the total earnings of the company throughout Europe and other non-European countries and attributing them to Ireland.

Ms Margrethe Vestager

We looked at two of Apple’s many companies, Apple Sales International and Apple Operations Europe. These were central to our investigation. What we saw was that Apple did not pay 12.5% of the profits recorded in the companies.

Ms Margrethe Vestager

Yes, in Ireland. There are other companies in Ireland, which were not the centre of our investigation where taxes have been paid.

Is the Commissioner aware of the fact that the Revenue Commissioners have flatly rejected that suggestion? Is she aware the Revenue Commissioners stand over the fact that they have applied the 12.5% corporation profits tax in Ireland on the company’s manufacturing profits in Ireland? Does she accept it is not their responsibility to apply tax for other countries on other subsidiaries of the company inside or outside Europe?

Ms Margrethe Vestager

The Irish tax authorities tax what is to be taxed in Ireland. We took an interest in this tax ruling because it allowed for profits to be allocated in part of the company, the headquarters, which were not taxable in Ireland. However, the branch side of the company was taxable in Ireland and we found the records that the profits ought to be recorded. That is the short and dry of the case.

What does the Commissioner say to the allegation made that the European Commission, having no responsibility for taxation in sovereign member states, is seeking by a circuitous route to take control of taxation?

The Commissioner mentioned that the US Senate committee was the first occasion on which this particular occasion arose. That was not the case. The same situation was raised by authorities in the Netherlands and France in 2009, 2010 and 2011, wherein it was attempted to blame the double-Irish taxation system and the 12.5% profits tax for the undermining of the European economy and the euro. The former French President, Mr. Nicolas Sarkozy, was leading in that particular situation.

I thank the Deputy. I have to conclude.

The Chairman would like this one.

I am sorry, I have to conclude.

The Chairman would like this one.

I invite the Commissioner to comment on what was just said, as we are concluding the meeting.

Ms Margrethe Vestager

The question at the beginning was followed by a speech and I forgot the question. I am sorry.

I will give the witness the direct one, so. The European Commission and the Commissioner are taking responsibility for taxation in a member state in which they have no authority whatsoever.

Ms Margrethe Vestager

That is a perfect question to end this hearing with, if the Chairman allows it. The answer to that question is "No". We are not, and we do not want to be, the Irish tax authority, the European tax authority or the international tax authority. None of our actions support that. We are the European state-aid controller, which is another matter.

I thank the Commissioner-----

What does the witness think the outcome of the court appeal will be?

Sorry, Deputy Durkan. I thank the Commissioner for attending with her officials-----

What does the Commissioner think? Mr. Sven Giegold said that he knows-----

I thank them for their co-operation and for the extra time given.

-----what will be the outcome.

Please, Deputy Durkan.

I thank the Commissioner for attending and for giving of her time. She gave us a lot more time than we had expected. I thank members for their participation.

Ms Margrethe Vestager

I am sorry that my answers sometimes become very long. I am afraid I myself am guilty of that.

I thank the Commissioner.

The joint committee adjourned at 2.20 p.m. until 2 p.m. on Thursday, 2 February 2017.