Reaction Trails Apple Tax Order by the European Union

Following the EU's crackdown on Apple tax benefits from Ireland, UK and US have reacted furiously to the order. 

It is alleged that the iPhone maker was permitted to pay just 1% on its European profits by Ireland in 2003. The rate, as alleged, further plummeted, that in 2014 Apple paid only 0.005% of its European profits. The tax benefit was ruled to be in breach of EU's competition law and consequently fined Apple 13 Billion Euros plus tax.

According to the EU Competition Commissioner Margrethe Vestager, the tax benefit was "selective", and gave Apple "significant advantage" over its competitors. 

REACTIONS TO THE DECISION

However, the decision has been met with harsh criticism from Apple, Ireland, US and UK. The Irish Finance Minister Michael Noonan referred to the decision as questioning the "integrity of [Ireland's] tax system" and an "encroachment of EU state-aid rules into the sovereign member state competence of taxation". The Finance Minister thus vowed to do everything "necessary to defend the integrity" of Irish tax system, hinting on a possible appeal against the decision.

Apple's CEO Tim Cook referred to the decision as an "effort" to "ignore Ireland’s tax laws and upend the international tax system in the process.”

The CEO further expressed the company's desire to appeal the decision.

"It will have a profound and harmful effect on investment and job creation in Europe. Apple follows the law and pays all of the taxes we owe wherever we operate. We will appeal and we are confident the decision will be overturned."

 The Speaker of US Congress Paul Ryan described the decision as "awful". He made the statement through his Twitter handle.

The EU's decision to slam a job creator with a giant tax bill years after the fact is awful

The US Treasury Department has similarly criticized the decision by stating thus:

“Treasury is disappointed that the commission is acting unilaterally and departing from the important progress the U.S., the EU, and the rest of the international community have made together to combat tax avoidance,”   

FURTHER REMEDIES AVAILABLE TO APPLE ASIDE/ AFTER A FAILED APPEAL

AD

What could be the possible implications since the tax "exemption" was based on Ireland-Apple deal that dates back to 1991? In the event that the appeal fails, what remedy avails Apple. First, there is no BIT between US and EU nor between US and the Republic of Ireland. Therefore, Apple cannot bring an investment-state claim under any BIT against Ireland. In this event, this option appears to be gloomy.

On the other hand, there is a contractual relationship between Apple and Ireland, does a ruling against the deal make it an illegal contract taken Ireland to be in "private capacity" and proceeding under domestic law of contract. The question turns on the status of the Ireland in the contractual relationship. If Ireland possesses a "private person" personality, then Appeal may proceed in the domestic courts of Ireland for breach of contract. But in this case too, the claim may fail on the ground of "the illegality of the contract" assuming the appeal by Ireland and Apple against the decision failed. Alternatively, Ireland may plead "frustration" or "force majure" to highlight its inability to proceed with the terms of the deal.

There is another option: if Apple can get the United States government to bring a claim under WTO. However, US would have the herculean task of proving that the decision, taken together with the earlier clamp down on Starbucks by EU for its tax "avoidance" in Netherlands, is a measure. Also, United States would have to twist the narratives to possess the form of a trade dispute too.

With these options not looking so bright on a cursory analysis, Apple may end up paying the "fine".