I invite the Minister to make his statement.
European Commission's Decision on Unlawful State Aid to Apple: Statements
I am grateful for the invitation to attend to speak in the Upper House about such an important issue.
At the end of August 2016 the European Commission announced that it had reached a negative decision in the Apple state aid investigation. It is important to clarify that no other companies are subject to this decision by the Commission and there are no other impending state aid cases against Ireland. As Commission Vestager has stated clearly, “This decision does not call into question Ireland’s general tax system or its corporate tax rate."
The Government profoundly disagrees with the European Commission’s analysis in the Apple investigation and will challenge the decision before the European courts. Our position throughout this process has been that the full amount of tax was paid in Ireland and no state aid was provided. Ireland did not give favourable tax treatment to Apple. Ireland does not do deals with taxpayers. In September Dáil Éireann passed a motion supporting the Government’s decision to appeal the Commission’s decision.
The European Commission first wrote to Ireland in June 2013 asking for information on the practice of tax rulings in Ireland. In particular, it requested information on any rulings granted in favour of Apple. The Commission later formalised the process when it publicly announced a full investigation into the dealings between the State and Apple in June 2014, giving its preliminary view that there was state aid. Ireland co-operated fully with the Commission’s inquiries. Over the course of the three-year investigation, detailed and comprehensive responses were provided for the Commission demonstrating that the appropriate amount of Irish tax was charged, no selective advantage was given and there was no state aid.
In August 2016 the European Commission made public certain details of its decision in a detailed press release. The Commission has yet to publish the final decision, which is a technical and detailed legal document that has been addressed to the State. Both Ireland and Apple are being given an opportunity to identify material within the decision which is subject to commercial confidentiality and which must, therefore, be redacted. Ireland is offering every assistance to the Commission under this process. However, it must be noted that the company also has the opportunity to exercise its rights in the matter. The procedure mirrors that which was used for the cases against the Netherlands, Belgium and Luxembourg, where it took several months for the Commission to make a copy of the decisions publicly available. This approach is also consistent with the process that was followed for the Commission’s opening decision in the Apple case in 2014. In order to be as transparent as possible and to allow for the appropriate public debate on the issue, I asked my Department to make an explanatory memorandum on the case available. This was published on my Department’s website.
In September the Government authorised me to appeal the European Commission's decision to the European courts. This is necessary to defend the integrity of our tax system, to provide tax certainty for business and to challenge the encroachment of EU state aid rules into the sovereign member state competence of taxation. Given that we are now facing an important court process in which Ireland will articulate a robust challenge to the Commission’s position, I am mindful of the need to avoid cutting across Ireland’s legal case in my contribution. That said, it is important for this debate that I outline, in high-level terms, what I believe are the key persuasive arguments for taking an appeal.
It is simply untrue that Ireland provided favourable treatment for Apple. The chairman of the Revenue Commissioners has stated emphatically that there was no departure from the applicable Irish tax law by Revenue, that there was no preference shown in applying that law and that the full tax due was paid in accordance with the law. It is very damaging for our reputation to be called into question on this. It affects how Ireland could be treated by other jurisdictions, damages Ireland’s credibility in the international tax debate and inhibits Ireland in pressing arguments that serve our national interest.
A further concern is that the European Commission is undermining the fundamental principle of international tax: that tax should be paid where the value is created. Everyone knows that the iPhone and other well known Apple products were developed in the United States, not in Ireland. Pascal Saint-Amans from the OECD made this very point when he visited Dublin last week.
A central aspect of the case is that the companies concerned were not tax resident in Ireland. Under Irish tax law, non-resident companies are chargeable to Irish corporation tax only on the profits attributable to their Irish branches. This means that profits of such companies that are not generated by their Irish branches cannot be charged with Irish tax under Irish tax law. Examples include profits from technology, design and marketing that are generated outside Ireland. The US Treasury has expressed a concern that in such cases the recovery sum could be creditable against a company’s US tax bill. If so, the company’s US tax liability would be reduced dollar for dollar by these recoveries in the event that the offshore earnings are repatriated or treated as repatriated as part of a possible US tax reform. This would effectively constitute a transfer of revenue to the European Union from the US Government and its taxpayers. The US Treasury has described this outcome as "deeply troubling".
The European Commission has stated the sums to be recovered by Ireland would be reduced if other countries were to require Apple to pay more taxes or if the US authorities were to require Apple to pay larger amounts of money to its US parent company. This points to a clear contradiction at the heart of the Commission’s decision. While requiring Ireland to recover the tax sums, the Commission is also acknowledging that the sums may in fact be taxable in other jurisdictions.
Taxation is a core member state competence, which is enshrined in EU tax treaties. This decision encroaches on member state sovereignty in the area of tax, by extending competition rules into the tax area to an unprecedented and unjustified extent. By doing this the European Commission creates uncertainty for business and investment in the European economy, both in its novel interpretation of long-standing rules and their unfair retroactive application.
It is important to emphasise that the bringing of appeal proceedings is not in any way an endorsement of aggressive tax planning arrangements, nor is it a defence of the extremely low effective tax rates that can be achieved under the broken international tax system. The reaction to the European Commission’s decision has, at times, painted an outdated and unfair caricature of Ireland’s position on tax that is at odds with the evidence and overlooks our proven track record in recent years. The facts show our constructive engagement at the international table, with early implementation of reforms ahead of many of our partner countries.
Despite the decision, Ireland remains committed to international efforts to reform international tax rules to ensure the correct tax is paid by multinationals in the correct place.
Our view remains that it is important that this be done in the appropriate way, moving forward in tandem with other countries on the basis of a global consensus.
On foot of the European Commission’s decision, Ireland is required to recover up to €13 billion of alleged state aid from the company covering a ten-year period. Notwithstanding the right of appeal, Ireland is legally obliged to recover that alleged state aid from Apple in the interim. This may be placed in a ring-fenced escrow account pending the outcome of legal proceedings.
Some of the public debate on the case has focused on an attitude of "take the money and run". The Government disagrees with that position. The European Commission has stated the sums to be recovered by Ireland would be reduced if other countries were to require Apple to pay more taxes or if the US authorities were to require Apple to pay larger amounts of money to its US parent company. This means that the final figure is by no means certain and may be the subject of complex, drawn-out engagement with other countries for many years to come. It should be clear that the Irish position all along has been that we have no right to this money based on Irish tax law. Therefore, the ultimate entitlement of Ireland to this tax revenue in the face of competing claims from other jurisdictions is highly uncertain. Furthermore, the figures remain subject to legal proceedings by Apple. Regardless of any Irish appeal, if Apple was to be successful in its appeal, the full amount would have to be repaid to the company.
The Government is of the view that there was no breach of state aid rules in this case and that the legislative provisions were correctly applied. By appealing the decision, the Government is taking the necessary course of action to vigorously defend the Irish position. Ireland has done nothing wrong. We have a proven track record in international tax reform and a strong commitment to meeting the best international standards. I look forward to listening to Senators’ statements on this important issue.
I thank the Minister for his contribution and welcome him once again. I welcome the opportunity to speak about the European Commission’s decision that Ireland provided unlawful state aid for Apple. Fianna Fáil supports the decision to appeal the decision. Providing a competitive, consistent and certain tax policy is a key feature of Ireland’s attractiveness as a leading location for foreign direct investment, to which the Commission’s unprecedented and deeply misleading €13 billion decision on the Apple case is a direct challenge. Approximately 700 US multinationals are located in Ireland, with some 187,000 people employed by foreign direct investment firms. All are potentially affected by the decision’s implications.
Government hesitation has only worsened the impact. The European Commission’s judgment marks a decisive overreach of EU power into national tax matters. Ireland must veto moves towards a common consolidated tax base and fight its corner to defend our national sovereignty and attractiveness for investment. Additionally, we must continue to work to lead the way in progressing international efforts to curb tax avoidance.
Fianna Fáil supports the decision to appeal the case for a number of reasons. First, Ireland has done nothing wrong and is entitled to set a competitive tax regime to attract foreign direct investment. The Revenue Commissioners fully applied Irish law as set out by the Oireachtas. The rights of member states to set their own tax policy has been consistently upheld and affirmed in EU treaties. There was no special treatment for Apple.
Second, the decision is essentially a power grab by the European Commission. It marks a move by the European Union to unilaterally expand its power and use competition law on state aid to interfere with national tax matters. The astounding figure is designed to soften the ground before the controversial common consolidated corporate tax base, CCCTB, measure is relaunched later this year. This forms part of a broader agenda to set a common corporate tax rate across the European Union and is being discussed at this weekend’s Economic and Financial Affairs Council meeting in Bratislava.
Third, retrospectively rewriting tax rules undermines tax certainty for all companies. A core feature of our attractive tax package is certainty, which allows companies to plan for the future. The European Commission’s decision, effective retrospectively, rewrites our tax rules over a 25-year period and threatens that key pillar.
Fourth, Ireland is not the chief tax collector for companies based here. The European Commission position is inconsistent as it claims Ireland is owed the €13 billion but also that other countries are or could be due the money. Ireland is not the international tax collector for all those companies based here. Our legal responsibility is to implement Irish tax rules. We have already taken the lead in implementing changes to our tax laws to combat aggressive tax planning.
Despite negative internal and international criticism, Ireland has a strong, attractive corporate tax regime and has ensured we have led the way in addressing concerns on tax avoidance by big companies. Fianna Fáil strongly believes this should continue to be our priority while ensuring we uphold our ethical and international obligations. Ireland’s 12.5% corporate tax rate is one of the lowest in Europe and is an iconic feature of our overall tax package for businesses. In addition, our research and development tax credit is best in its class. The knowledge box 6.25% rate was the first globally to receive OECD approval.
The global backlash against multinational corporations avoiding tax through aggressive planning has already prompted a significant shift in Irish taxation policy. The Apple ruling refers to an historical taxation issue. We have led the way in developing new methods to ensure companies pay their fair share and are deeply engaged in the OECD base erosion and profit shifting process, BEPS. For example, the controversial “double Irish” was ended in 2014 to ensure shell companies could not avoid tax bills. Stateless issues were addressed to ensure Irish companies could not avoid tax. We have implemented country-by-country reporting and ensured the knowledge box was OECD approved, the first in the world to do so.
Ireland will continue to fully engage with the OECD process and EU initiatives such as the action plan for fair and effective taxation. However, any EU measure effectively designed to standardise corporate tax rates must be fully resisted. This weekend’s discussion by Ministers of the Economic and Financial Affairs Council in Bratislava must be used to set down a firm marker that Ireland will not relinquish control of our domestic taxation policy. It must also be used to engage with potential allies in this policy discussion in the European Union, in particular with countries such as the Netherlands and Luxembourg.
There are broader implications. The European Commission’s decision also exposes the serious geopolitical challenges Ireland faces in the immediate future. Our successful economic model has drawn on foreign direct investment and our membership with the European Union, as well as deep trading links with our closest partner, the United Kingdom. Tensions between these parties are now increasingly evident. Brexit represents a serious diplomatic challenge and the prospect of the United Kingdom ramping up competition for foreign direct investment is very real. The European Union has escalated efforts to introduce a common tax rate, for example, the CCCTB proposals are to be relaunched. Meanwhile, the European Union has launched a series of actions against US multinationals that puts pressure on our role as a leading location for foreign direct investment. Any slide towards protectionism or a power grab by the European Union would deal a serious blow to our geopolitical strategy.
The botched response of the Government to the European Commission’s findings exacerbated the impact of the decision. Instead of moving swiftly to reassure the foreign direct investment community of our continued commitment, it publicly hesitated and fretted over this illusionary €13 billion. The Government needs to send a strong, clear and unambiguous message that it will vigorously contest the European Commission ruling. Our commitment to a fair 12.5% corporate tax regime must be reaffirmed as the cornerstone of our foreign direct investment policy. Our membership of the European Union remains a core belief of Fianna Fáil, but we must be willing to fight our own corner from within the European tent. Ireland must veto any moves towards the CCCTB and fight its corner to defend our national sovereignty and attractiveness for investment. Additionally, we must continue to work to lead the way in progressing international efforts to curb tax avoidance. I thank the Minister for attending and look forward to his response.
I thank the Minister for his presentation. It has been over one month since the European Commission ruled in favour of the Irish people who pay their taxes and demanded that Apple do likewise. Immediately, even before he had seen the decision, the Minister indicated that the State would appeal a decision to return a decade of unpaid tax deemed by the Commission to be due to the Irish people. At the time, my colleagues, Deputies Pearse Doherty and Gerry Adams, urged the Minister not to do this and made very sound arguments in that regard.
I come from an area where small and medium businesses are struggling. After they have paid their tax demands, there is very little money left to expand or make improvements and, in some cases, they do not even have a decent wage themselves. Nothing in the Government's response gives any comfort to the people concerned. What we got from the Minister was a sudden, overwhelming and false conversion to the importance of Irish sovereignty - this from the Government that went against the interests of the people so as not to be embarrassed or have "defaulter" stamped on its forehead in front of European colleagues.
People do not believe the Government's line that all this came as a surprise to it. Just like Brexit, this was coming down the tracks for a long time and the Government did what it always does, namely, wait until the last minute. It was behind on many issues. When my colleague, Deputy Pearse Doherty, raised the issue of the double Irish. he was told by the Minister that it was not our problem. When he raised the issue of stateless companies, he was told that he was a rabble rouser who could damage Ireland's reputation. When I asked the Minister at the National Economic Forum back in June if he could quantify the loss to the State of tax avoidance by vulture funds, he chose to ignore the question. Likewise on this issue, the Government is fobbing off Sinn Féin.
This is a Government stuck in the 1990s when it comes to international tax. It is being dragged, kicking and screaming, into the 21st century. Some of the reaction to our alternative budget launched today is very similar - a repetition of the mantra that we, in Sinn Féin, do not get economics. The public has been gifted the clearest example yet of who really does get economics. We, in Sinn Féin, say we should take the €13 billion owed to us for the betterment of the people and to send a clear message that while we welcome multinationals, we have a fair approach to taxation. This is nothing to do with our 12.5% corporation tax rate which has been put out there as a red herring. The claim is that it is part of tax harmonisation, but it is nothing of the kind.
Fine Gael states we should not take it because it would expose it as complicit in a grubby deal that served the privileged few. Now that we have had time to digest the fact that the Minister is going ahead and appealing the ruling, there are a couple of points I want to raise with him. How much will the appeal cost? Is there a bottomless pit of money from hard-working Irish citizens? Why do we not just let Apple appeal, without the involvement of the Government? Who benefits from the decision to appeal? So far, all we know is that William Fry has been engaged to advise the Government in setting up an escrow account. The country certainly will not benefit, but a tax servicing company will.
Listening to some Members one would believe the idea that state aid and tax ever collide is something unprecedented, unheard of. In fact, the Minister for Finance recently told my colleague, Deputy Pearse Doherty, that Ireland had sought the opinion of the European Commission on 15 separate occasions on our tax policy in the past ten years. The issues ranged from looking at a refund of social security contributions for seafarers to changes to the Irish film tax relief system. In short, it is normal and mundane for the Commission to look at the state aid implications of what the Revenue Commissioners do.
I again ask that the Minister reconsider his decision to appeal and accept the tax money owed to the people. I am asking this on behalf of all the people who struggle to get by, yet manage to pay their taxes. I am asking him because he knows that, globally, up to $240 billion are lost each year as a result of countries, like ours, facilitating tax avoidance. His positive rhetoric on reforming tax law is belied by the Government's failure to clamp down on tax avoidance on a vast scale. He must put an end to the tax secrecy which has facilitated tax cheating on a major scale and denied the people an economy that serves all of its citizens, not just those in the golden circle.
I wish to take up the previous speaker on a couple of points. She is peddling false propaganda. The €13 billion is not available to the Irish public. If she were to read the Apple ruling and the 2014 ruling, she would see that they were contradictory. They mentioned the sum of €13 billion, but it was indicated that some of it could belong to the United States. Subsequent to that, the OECD has stated the majority of the money is chargeable to US tax. Putting it to the public that the €13 billion is available is irresponsible; it is an untruth and does not deal with the arguments at hand.
The Senator spoke about taxpayers but Apple employs some 6,000 people in Cork. They pay PAYE and PRSI like anyone else. They are educating their children and paying their mortgages, a point she is completely overlooking.
The Senator is not dealing with the topic.
We should have a chance to respond.
These points stand on their own merits. The Senator spoke about sovereignty, but as a sovereign nation we have to have control over our tax laws. Apple was in compliance with the tax laws in place at the time in question. The European Commission now states the taxes in question may be due to other countries in Europe and the United States.
I question the timing of the European Commission's announcement, whether it has to do with the US elections or something else. I question the fact that the decision has not been published. As we expect it to be a carbon copy of the June 2014 decision, nothing appears to have changed in the past two years. There will be confidentiality issues, but I ask for it to be published as quickly as possible. Thhis is a small, open economy and we have to be able to attract multinational companies in a global market. We have a 12.5% corporation tax rate that is probably the most transparent corporation tax rate in the world. France and other countries have a multitude of tax deals with particular corporations. The difference between the profits and the taxable profits of a company in Ireland is very little.
Why is Apple paying less than 2% in tax?
I am talking about a specific issue. This issue will come down to the question of selectivity and whether Apple was given selective treatment on a particular issue. The answer is "No". It was open to any company to avail of the same tax laws that were in operation at the time.
I worry about the fact that the common consolidated tax base which has been mooted for several years is coming onto the radar again. I worry that it could be used as a Trojan Horse to get at our 12.5% corporation tax rate. It is welcome that the European Commission has stated our 12.5% rate is not under attack, but I would be vigilant on the common consolidated tax base because it is such a complicated and convoluted proposal that, while the 12.5% rate might remain, in practical terms it could be eroded.
I was watching the BBC on Sunday and saw Theresa May speaking at the Conservative Party conference about Brexit. It is not in Britain's interest not to be part of the Single Market and certainly is not in our interests. It is welcome that the Taoiseach has today set up an all-Ireland dialogue on the matter. Northern Ireland and the Republic have far more in common on this issue than they have differences. We should work together on a cross-party basis. I ask all parties to engage because it is in all of our interests to protect our vital trade links, the common travel area and the open border.
I think the European Commission has got this wrong, although I accept there is a need for certainty in the way multinational companies are taxed worldwide. That is happening with the BEPS and, in respect of our own situation, the double Irish is no longer in place.
We have the knowledge box, which is very beneficial. As a country, we cannot take responsibility for differences in tax laws worldwide. We can only apply our own tax laws. One could equally make the case that other countries should have changed their own tax laws. I very much support the appeal in the Apple case. Ireland needs certainty in how we tax companies. The rate of 12.5% is sovereign. On the key issue of selectivity, it will be found that Apple was not given a selective agreement and that it was open to any company worldwide to apply for it in Ireland.
A number of concerns have been raised and I will not reiterate all of them. I will build on the point of the last speaker. He is correct in saying the arrangement between Ireland and Apple is not simply a matter between Ireland and Apple. That is a key point. The arrangement we hear of is likely not only to have deprived citizens in Ireland of much-needed resources but also citizens across Europe and the world. The €13 billion may not be directed to Ireland, but it is, nonetheless, €13 billion that was not paid in tax and revenue.
Apple's use of a stateless entity, notionally located in Ireland, results in countries not only in Europe but also the Middle East, India and, to a lesser extent, Africa seeing the profits generated in their regions channelled away from their local tax authorities into Apple Sales International in Ireland. Until the European Commission's ruling is publicly available - we may need to return to this issue at that time - it will not be possible to know how much the various countries in each of these regions have been deprived of. While the bulk of the profit is likely to have been generated in Europe, even a relatively small amount in an African context has the potential to deprive some of the world’s poorest countries and most vulnerable people of transformative and life-saving resources. In 2011, for example, the entire health budget of Sierra Leone was just under €25 million, a mere 0.21% of the €13 billion Apple is being asked to repay. This money has a huge, transformative role to play in revenue.
There are serious moral questions attached to this matter for the Government, the aid programme of which is rightly lauded as being among the best in the world and the recently updated foreign policy of which places human rights at its centre. Moreover, Ireland played a key role in negotiating the sustainable development goals, SDGs, universal goals that should be applied in Ireland and all countries. How, then, can we stand over past or future tax policies that could undermine the ability of developing countries to raise the revenue they need to deliver on SDGs or meet their human rights obligations? If we continue on this path and do not accept the problems we have caused through these practices, irrespective of whether the arrangement was peculiar to Apple, we will risk damage, not only to the other countries affected but also to our international reputation. That is why we need to embrace this issue strongly. We need to accept that there are tax justice issues we need to address and place this thinking at the centre of our response to the Apple tax issue.
The Apple case is, of course, not a one-off; it is part of a damaging race to the bottom in which governments are competing across the world in providing multinationals with lower tax bills. This is a recipe for disaster for tax-funded public services across the world. Tax arrangements of both multinationals and governments must be brought into the open. When deals are done behind closed doors, the general public loses out. It is interesting that the Government proposes this very month to sign up to the provisional application of the comprehensive economic trade agreement, CETA, an agreement that will give corporations unprecedented access to and influence over the regulatory process and public policy-making, yet those corporations are still afforded extraordinary secrecy.
Multinationals like Apple must be obliged to publish the country by country tax reports that they are already making to governments in order that they can be subjected to public scrutiny. To date, the Government has resisted calls to be a voice championing the "publish what you pay, country-by-country" tax report. I ask that Ireland now take the lead on that issue. Even if its tax policy is to be based on competing with other states on lower taxes, the very least it can and should do is insist on the highest level of transparency from multinationals operating in the State. Public country by country reporting would be an important step in that direction and restore some faith in Ireland's beleaguered reputation.
The Committee of Public Accounts should also have a role in reviewing the use of previous rulings by multinational companies. These rulings are not currently debated in the Oireachtas, nor are they subject to political oversight outside the office of the Minister for Finance. I ask the Minister to support and facilitate greater oversight and a clear role for the Committee of Public Accounts in regard to these rulings.
The Government has agreed in the response to the Apple ruling that it will host a high-level tax conference before the end of the year. I ask the Minister to assure us that there will be a strong tax justice element to the conference. I also ask him to ensure the independent review of Irish corporation tax policy which is due to take place will be open to consultation with the public and the Oireachtas. I recognise absolutely that the corporation tax rate of 12.5% will not be part of the review. That is fine, but we would restore faith in a rate of 12.5% if it became an effective tax rate of 12.5% and if we took the lead in ensuring transparency in other areas.
I wish to point to the concerns raised about tax sovereignty. It is important to note that while we are saying the European Commission has got it wrong and that we have a different position, we should note that the Commission also has a different position on the scope of the provisional application of the CETA because it believes this is entirely an EU competency. It believes the European Commission has sole responsibility. Ireland and other member states have a different view. How will we reconcile these views? Why would we sign up to the provisional application of the trade agreement when we have seen what this difference in view or position leads to? Will tax be the only area in which we care about sovereignty or will we be asserting sovereignty in other areas such as public services, workers' rights and environmental provision? In that regard, are we going to wait until the court case in the European Court of Justice before we run ahead and sign on for provisional application?
As the Minister knows, the Labour Party in the Dáil supported the decision made by the Government to engage in an appeal against the decision of the European Commission. It was inevitable that an appeal would be launched, if only by Apple itself, and it was inconceivable that Ireland, as a sovereign nation with responsibility for its own tax affairs, would sit this one out, given the absolute enormity of the matter in hand and the impact on the State of the decision and our industrial policy and reputation, as stated. I sincerely hope the State’s case will be advanced in a better fashion than that evident from the confusion that seemed to characterise the Government’s initial response to the Commission’s decision.
There are enormous issues at stake in the context of the Apple decision. It is clear to all of us, including the Minister, that all of the facts are still not available and we may not know all of them for some years. Important issues will arise in the context of the appeal hearings and the processes which will provide us all with a better understanding of the rationale for the European Commission’s decision. However, as a sovereign Parliament and Government of a member state of the European Union, we need to assert very forcefully some important points. It is the elected Government and Parliament of this republic that get to set our tax policy. Ireland is not, never was and never will be a tax haven, but neither will we be a tax collector or a clearing house for taxes that may be owed to other states across the European Union or anywhere else for that matter.
The tax policies in this republic should be applied to everyone equally and equitably, regardless of who one is or whom one represents. As the share of capital enjoyed by working people and other citizens across the world diminishes and as we see how the top 0.1% live and behave, tax justice is becoming an increasingly important principle.
Ireland and the European Union have a major role to play to redress the balance in that regard.
I agree that all corporations must pay their fair share of tax generated and owed in Ireland. I was a member of the Government and worked with the former Minister, Deputy Brendan Howlin, and others to end the so-called double Irish rule. We had to put an end to the murky practice of profit shifting and running profits through brass plate companies. We worked with the OECD to, in a sense, lead the way on those reforms. The European Commission has recognised the fact that the practice it investigated has been closed down.
The Minister will recall that we engaged in an intensive diplomatic effort and a lobbying offensive to explain this to other countries and existing businesses that are located here and to make sure there was clarity about the intentions of the Government on the ending of the so-called double Irish rule and certainty for investors. Those of us who are interested in the creation of good, decent jobs know how important that is. The pipeline for foreign direct investment is continuing apace. We can take it from that that the reassurances that we provided for international investors on Ireland's tax policy have reassured them that investing in Ireland is a safe option.
Some here are calling for the immediate allocation of €13 billion that, as Senator Kieran O'Donnell said, we simply do not have and might never see even a portion of. The OECD has stated most of it belongs to the United States, something of which we need to be mindful. It is not clear, based on the fiscal rules under which we now operate, whether all or a portion of this money, if it became available to us, could be spent by us on housing and transport projects and health infrastructure that the State needs. That alone is another good reason, if one was needed, for the Government to heed Deputy Brendan Howlin's call for a relaxation of the fiscal straitjacket in order to allow us to spend more of our own resources on the critical infrastructure we as a society and economy need.
In terms of tax policy, I ask that the Minister reconsider the proposal made by my colleague, Deputy Joan Burton, to have a standing commission on taxation. Tax policies and initiatives that may have been established in the past or will be in the future, with very good intentions, may subsequently reveal significant loopholes that well paid tax lawyers and accountants are only too happy and able to navigate around for their blue chip clients. We have a very static system which has very limited ways of responding to anomalies in the tax system outside of the cumbersome processes we apply to the annual Finance Bill. A standing commission, similar to the Company Law Review Group, for example, in how it approaches its work, would be a good model to allow us to identify and close loopholes before they do untold damage to our system, public confidence in it and tax schemes into the future.
I welcome the Minister and thank him for his presentation. I come from the local electoral area where the Apple facility in Cork is based. It is a mixed area, in that a large section comprises local authority housing where at one time unemployment reached well over 50%. It is an extremely important facility in Cork in terms of the contribution it is making to the local economy.
In real terms, about 18,000 jobs in Ireland are a result of Apple and all of the spin-off enterprises associated with it. At an average salary of €40,000, the contribution to the economy per annum is about €720 million. That shows the commitment Apple has made to Ireland. It came to Cork in 1980, stayed, continued to expand and grow its facility and provided jobs for Irish people. Over 5,000 people now work in the facility in Cork and there are plans to expand that figure to over 6,000. It is a significant contributor to the national and local economy because it pays commercial rates and local taxes.
We seem to ignore the contribution companies make at a local level in paying rates. I produced a summary of the rate contributions made by the ten largest companies in Cork. Cork County Council collected €118 million in rates, of which the top ten companies paid €27 million. In Cork city, out of €61 million collected, the top ten companies paid €9 million. One of the local authorities in Dublin collected €314 million in rates, of which the top ten companies paid €77 million. These companies are making significant contributions, not only to the national economy but also local economies. The rates being collected contribute to providing local services, whether it involves ensuring local authorities can deliver amenities, housing and other things. It is important that we recognise that fact.
In addition to the employment Apple is providing in Ireland, it has also agreed to proceed with a €850 million data centre in Athenry, which is another significant investment. Apple has made a major contribution to the country. There are 18,000 jobs in Ireland as a result of its investment.
Sinn Féin opposed Ireland joining the European Union. At the time, there were 1 million people working in the country. There are now 2 million people working, which is a result of our progressive policies to attract companies like Apple and make sure they receive the necessary support to stay and provide jobs. That is an extremely important point. We must keep in mind the contribution these companies are making and will continue to make. It is important, therefore, that we appeal the decision. Unlike what my colleagues say, I believe that if the Irish Government did not join in the appeal, Apple would have appealed it. The required money would not have been available. Apple will appeal the decision all the way. Ireland has to appeal the decision because we must protect our sovereignty in making decisions on tax policy. I fully support the Minister and the Government in lodging the appeal.
I will be very brief and not repeat the points my colleagues have made.
I have some questions for the Minister. Was a special deal done between the State and Apple? The chief financial executive of Apple said to US politicians:
Since the early 1990s the government of Ireland has calculated Apple's taxable income in such a way as to produce an effective rate in the low single digits. The rate has varied from year to year, but since 2003 has been 2% or less.
In 2009 and 2010 it paid less than 1% in tax and in 2011 it paid 0.05%. As the Minister has said the answer is "No", why did the chief financial executive say what he said? It is simple question. It seems very odd. Was he having a bad day? Was he on some recreational drugs at that point?
The Minister said, "We have a proven track record in international tax reform and a strong commitment to meeting the best international standards." Is he having a laugh? The world and its wife knows that Ireland has been a haven for tax avoidance for years. The Apple tax deal is evidence of this. The Minister does not have to take my word for it; it is what the chief financial executive of Apple had to say.
I welcome the Minister to the Chamber and thank him for his statement. The contributions of some Members opposite were laughable. Senator Colm Burke made a very good point. This is about the economy, job creation, ensuring we can bring people from abroad to work here and creating full employment. Whatever Senators want to say about the Minister for Finance during his tenure in the Department, the one thing he has been driven by is rescuing the country, getting people back to work and creating the opportunity for all of us, no matter who we are, to have a decent and fair standard of living. The laugh is not on the Government or Apple; rather, it is on those in the hard left who oppose everything.
I will put the matter in context.
Apple has been good for Cork. Apple is good for Ireland. Nearly 6,000 people are employed.
We know this. It is irrelevant.
There is no sweetheart or special deal. It is about jobs.
That is not what the Apple executive said. Why did he say it?
I challenge anyone in this Chamber to go to Hollyhill and walk in the footsteps of Apple and look at the number of people who are working. Please allow me to give a couple of statistics. Jobs do not appear out of nowhere. None of us wants to see people not paying tax. We are not like Donald Trump.
We are getting there.
We are about making sure we create jobs. Let us put the matter in context. Some 140,000 people are directly employed in more than 700 US firms in Ireland, which accounts for 74% of all IDA Ireland-supported employment. US firms contribute €3 billion to the Exchequer in taxes and an additional €13 billion in expenditure in the economy in payroll, goods and services. Considering that US investment in 2015 accounted for 74% of all foreign direct investment in Ireland, it is important that we not only support but also work with the US firms that form a critical part of Ireland's jobs, infrastructure and industries. These figures come from the US Chamber of Commerce, not from the Government or me.
We all agree on that point. The Senator is not addressing the question.
I will conclude on this point. The point the Senator and some of those who oppose this are missing is that Apple, as Senator Colm Burke rightly said, was going to appeal it in any event. What we must do is ensure we have sovereignty and reassert our primacy in terms of our corporation tax rate by appealing the ruling to the European courts. First, the European Commission has not published the full judgment. Second, it is quite clear that if we do not appeal the ruling, we will be saying we have been involved in illegal activity, which is what the Senator is accusing us of doing. We have not been. We are trying, as we have been doing for a quarter of a century, and for once-----
It was not me who was saying it. It was the Apple chief executive.
Senator Jerry Buttimer to continue, without interruption.
I appeal to the Sinn Féin Senator for once to abandon his voodoo economics-----
What does the Senator mean by leprechaun economics?
-----and join the rest of us in bringing jobs here, creating jobs and having sustainable and meaningful jobs. The Minister is right. We have to appeal. It is about the people and the country and if we were to do otherwise, we would be negating our responsibility.
It is very interesting to hear this debate and I thank the Senators for having it. The appeal is being prepared by the Office of the Attorney General. She has two months and ten days in which to prepare it and then it will be lodged. The procedure is that there is the European ordinary court, if I might call it that, which will hear the appeal in the first instance and then there is the European Court of Justice which is the court of appeal. Whoever loses will, I presume, appeal it in the ordinary court. The process will go on for four years or so, or perhaps longer.
There are other issues which arise also in the European Court of Human Rights in Strasbourg. If one looks at the European Convention on Human Rights, section 6 or section 7 lays down principles of law under which one cannot be the judge, jury and prosecutor in one's own case. It seems that the Competition Commissioner arrived at a decision in 2014, had a process which was supposed to be semi-judicial and arrived back at the same position again two years later. Under the European Convention of Human Rights, it seems that process is not correct.
One is not allowed to apply civil or criminal law retrospectively under the European Convention of Human Rights, yet in this case, criteria which were only agreed to in 2010 were applied retrospectively. The case being made is that Ireland is owed all of this tax. In the decision, as a number of Senators said, as well as saying Ireland did not collect the required amount of tax from Apple and that there are a lot of arrears which are now the responsibility of the Irish authorities to collect, it goes on to say in the accompanying press statement that some of this may not be Ireland's tax at all, that perhaps it should be that of other European countries. If Apple paid more tax or returned more income to the United States, perhaps it was tax due in the United States. My view of law is fairly simple. One cannot have it both ways. If the Irish authorities are being required to collect arrears, the Commission has decided that the money is appropriate to the Irish Exchequer. I never signed on in the European Union to be the tax collector for Austria or Spain, both of which are now suggesting some of the tax may be theirs for iPhones and iPads that were sold from their jurisdictions. Much of this decision just does not make an awful lot of sense. It is something that has to be appealed to ensure we protect our position and sovereignty.
The wider issues are fairly straightforward also. Under the European treaties, tax matters and especially tax rates are matters for sovereign governments. That is what the European treaties state, that is what we decided in 1972 and that is what is has remained after the various amendments to the treaties that have occurred, yet now the suggestion is the rules for state aid are superior to the treaties. That is like saying statutory rules which we will promulgate here are superior to the Constitution. There has to be primacy in law where the treaties are primary and anything else is subsidiary to it. The European Commission is turning the legal position on its head. By the way, I am not proposing, or suggesting, that at this stage we appeal to the European Court of Human Rights in Strasbourg. However, I am saying there are other flaws in the approach and we reserve our right to pursue them at a future date, if necessary. In the meantime, we are going to appeal this decision in the interests of the people.
At a meeting of ECOFIN that was extensively reported on, the president of ECOFIN said these were historical and legacy issues as far as Ireland was concerned. He name-checked both the Taoiseach and me and said the two of us were at the forefront of OECD tax reform. As far as he was concerned, legacy issues should not be pursued, that we should work forward when we reformed tax law and that Ireland was at the forefront of the reforming movement in the OECD.
When the head of taxation at the OECD in Europe, a French socialist lawyer, Pascal Saint-Amans, visited Dublin the week before last, he made it very clear that, as far as he was concerned, if there was a tax liability, it was to the United States, not Ireland. The reason he formed that view is simple. It is true to say Apple paid very little tax and that the figures put forward by Commissioner Vestager are correct. However, Apple paid its full tax liability on its Irish activities. It is probably the biggest corporate taxpayer in Ireland. It did everything necessary in Ireland. What is being charged is that we should have collected tax on Apple's profits in other jurisdictions. In the ruling the Commission makes no distinction between resident and non-resident companies. Under Irish law, the Irish tax authorities have no authority to collect tax from non-resident companies. That is a matter for the jurisdiction in which they are resident. That is one reason I think the European Competition Commissioner is wrong in law.
The position on US tax law is that while Apple paid a very low amount of tax, it has a very large tax liability. However, the way US corporate tax works is that the liability only turns into tax to be paid when the profits are repatriated. Then tax is paid at a rate of 35%. The low percentage of tax Apple paid is correct. However, if one looks at what its tax liability was, it was much larger than that. The liability is to the US Exchequer because it is in the United States that economic activity principally occurs that gives rise to the profits Apple makes.
If Members have an Apple iPhone, they can see very small print engraved on the back of it - I had to get one of my children to read it for me because my eyes were not good enough - stating it was designed in California and manufactured in China. The economic activity, therefore, does not occur in Ireland but in the United States. Under OECD principles, the tax is due to the United States and under US tax law, the tax is due in the United States but not payable until Apple repatriates its profits. That is the reason Pascal Saint-Amans of the OECD said that if the tax arrears were due anywhere, they were due in the United States. The tax is not due in Ireland; why, therefore, should the responsibility for collecting it rest on the Irish tax authorities? I appreciate that the issue is very complex. I thank all Members for their contributions and our Sinn Féin colleagues for making the debate interesting by having a different point of view.
Conflict often clarifies, as long as it is within parameters.
We did not get that far. It is a work in progress.
I thank Members for their contributions.
When is it proposed to sit again?
Ar 10.30 maidin amárach.