Noonan confident Apple Tax offering does not breach rules

Minister for Finance Michael Noonan has said he has confident that Ireland will not be found to be in breach of state aid rules regarding its tax offering to Apple, ahead of today’s meeting of European finance ministers, the first since the European Commission launched a probe into tax deals offered by Ireland, the Netherlands and Luxembourg.

Speaking on his way into yesterday’s euro group meeting, Mr Noonan said he did not believe the announcement last week of a probe into Ireland would affect its reputation internationally. “I think the Apple situation was pretty old news since the hearings in Congress.”

He said the Government would await the OECD’s proposals on base erosion and profit shifting expected in September, and could make changes in the budget.

“We’ll see what state of readiness is in their recommendations, but our objective would be to move with international opinion, rather than moving unilaterally.” While the European Commission had a right to investigate state aid cases, tax remained a national issue, he said. “It’s still within the treaties the responsibility of sovereign governments to set tax rates.”

Objections

While last week’s announcement of a state aid investigation into Ireland, the Netherlands and Luxembourg is not on the agenda of today’s Ecofin meeting of all 28 EU finance ministers, ministers will be updated on the Code of Conduct on Business Taxation, an EU group which assesses individual countries’ tax regimes. In addition, Luxembourg is expected to raise objections about the EU council’s definition of so-called “patent boxes”, a financial device that allows companies decrease their tax liability.

Luxembourg’s request that the European Council’s legal services examine the issue of patent boxes signals growing tensions within EU member states about the tax structure which is used by a number of nations to attract investment.

The European Commission announced last week it was examining nine countries in relation to the use of the device.

Britain introduced the scheme last year, allowing companies to pay 10 per cent corporation tax on profits earned from patented inventions, rather than the regular 21 per cent corporation tax. It is understood to be lobbying strongly against possible restrictions on the measure, which is a focus of the OECD’s current examination of global tax practices. The US and Germany are understood to be against the device which allows companies to reduce their tax liability.

Frustration

Luxembourg and the Netherlands responded strongly last week to the European Commission’s announcement of an anti-trust tax investigation.

According to a number of EU sources, there was frustration in some capitals that the language used by the commission had suggested that the countries involved had already been found to be in breach of state aid rules.

Luxembourg has been referred to the European Court of Justice for not fully complying with the initial investigation into its tax offering to Fiat. In a statement following last week’s announcement the Luxembourg finance ministry said the European Commission “had not provided any new evidence to dispel the serious doubts about the legality of the requests and the extent of the powers of the commission.”

Also on today’s Ecofin agenda is a discussion on new rules on the parent-subsidiary directive which gives a tax exemption for dividends and other profit distributions paid by subsidiary firms to their parent companies. There have been fears that the device is being used by companies to avoid paying tax.