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Raymond Friel - Clare FM 01/09/2016

01.09.2016
Ray Friel

Ray Friel, as Director of the International Economic and Commercial Law Group was on Morning Focus, Clare FM with Gavin Grace discussing the recent EU Commission ruling on Apple. Friel outlined that there were two separate issues here: first, the taxation of manufacturing activity that Apple carries out in Cork and second the use of corporate and tax structures in Ireland to defer US taxation. The former were not in question but the latter were increasingly becoming more controversial. In fact Ireland has moved to restrict the anomalies that permitted Apple to build up significant profits outside of the US using inconsistencies in both Irish and US tax codes.

 Friel pointed out that in reality this ruling from the EU Commission was not the usual interpretation of a state aid but reflected an underlying attempt by the EU to remove the sovereignty of member states in tax matters through the back door. Its retrospective application also constituted a breach of the fundamental rights of Apple and noted that a similar charge was made against the Commission in the recent Intel investigation. Friel pointed out that this tax was being levied by the Commission on profits earned outside of Ireland which we have no legal or moral right to levy at the time the profit was made or even today.

 

Asked by Gavin whether we would then be successful on appeal, Friel said he believed that we probably only have a 40% chance of success as EU courts often look to the broader issues of EU integration rather than a strictly legal analysis, although there may be a reduction in the tax calculated. However, it was important to take the appeal for three main reasons. First and most importantly, Ireland needs to defend its remaining sovereignty from attack by the EU institutions. This was particularly important as with the impending departure of the UK, we will lose the strongest proponent of member state rights. Second, we need greater clarity of what the term ‘state aid’ means as the current commission ruling has altered it beyond all recognition. It potentially calls into question all types of state supports. Finally, there is a responsibility on Ireland to follow the rule of law. Much has been said about our reputation, but if we believe what we did was lawful then we are obligated to defend it to the end.

Off air, Friel points out that the anger at the EU in the US is palpable although at the moment that has not been directed to any significant extent towards Ireland. However, they are closely watching our response to the ruling and that might change their view.

 September 1, 2016 at 9.15am.