Date posted: 17/09/2020

Ireland’s Apple Tax case – shining a light on OECD developments

While jurisdictions around the world are contemplating how to keep the revenue coffers in the black in light of COVID-19, Ireland recently celebrated a legal victory that meant they missed out on 13 billion euros of tax revenue.

In brief

  • EU court rules in Apple (and Irelands) favour
  • Ireland would have received 13b euro if they lost the case
  • OECD due to progress multilateral digital tax in October

The European Central Court recently overturned a 2016 European Commission decision which claimed Apple had received illegal tax breaks in Ireland. The Commission claimed that Apple had attributed nearly all its European Union income to an Irish head office, taking advantage of Ireland’s very low corporate tax rate. Earlier this year the higher court found there was insufficient evidence to show Apple broke European Union competition rules and had the court upheld the 2016 decision, Apple would have had to pay Ireland 13 billion euros in back taxes.

The decision comes at an interesting time as the OECD is expected to convene in October to discuss the progression of pillar one and pillar two ‘digital tax’ measures. This programme of work stems from concerns that businesses, like Apple and Google, can benefit from lower corporate tax rates in jurisdictions where they no longer need to have a physical presence within a market. Pillar one addresses the reallocation of taxing rights between jurisdictions, while pillar two considers a minimum tax threshold to prevent a ‘race to the bottom’ on corporate tax around the world.

OECD faces a challenge to reach consensus

Chartered Accountants Australia and New Zealand have made submissions on both the OECD taxing rights and minimum tax proposals however, jurisdictions around the world have very different views on the proposals. Ireland for example, has a very low corporate tax rate, and this helps drive Ireland’s Economy. The United States has been very vocal in their views that these measures would unfairly impact them by capturing the likes of Facebook and Netflix – going so far as threatening France with tariffs for considering adopting similar measures unilaterally.  

The view of Chartered Accountants ANZ is that there are inefficiencies in how international profit is allocated in our digitised world, and there is also a need to ensure any changes are efficient, simple and don’t create undue compliance burdens. A large concern for New Zealand is what these proposals mean for a geographically isolated exporting nation. As a result, a new approach needs to be sufficiently targeted and we support a high application threshold. 

The OECD have agreed to reach a consensus-based solution by the end of 2020. While this will be no easy feat, we’ll be keeping a close eye on developments. Whilst New Zealand briefly considered a ‘go-it-alone’ digital services tax, similar to the measures that landed France in hot water with the United States, the preference is for the development of a multilateral solution recognising New Zealand’s needs.