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£11bn Apple row will hurt drive to cut tax avoidance, says former top EU official

By Donal O'Donovan

Published 02/09/2016

People queue in Belfast for the latest product at the Apple Store
People queue in Belfast for the latest product at the Apple Store
Tim Cook

The EU's decision to order Apple to pay €13bn (£11.1bn) in back-taxes is a misuse of State aid rules and raises serious questions about the rule of law in Europe, according to a blistering intervention by former European Competition Commissioner Neelie Kroes.

The controversial ruling that Ireland provided illegal State aid to Apple will undermine rather than help global efforts to tackle tax avoidance, she said.

The Dutch politician, who oversaw competition enforcement across the European Union during the financial crisis, weighed into the controversial State aid ruling against Ireland in an opinion piece written for the Guardian newspaper.

Kroes accused her successor, Margrethe Vestager, of attempting to rewrite corporate tax rules in a way that "raises serious questions about legal certainty and the rule of law".

"Member states have a right to determine their own tax laws," she said. "State aid cannot be used to rewrite those rules."

The decision to order Apple to pay taxes dating back more than a decade that had not been sought at the time was particularly worrying, she added.

"It is a fundamental principle of tax law that changes will not apply retroactively," Kroes said.

"Companies (as individuals) should know what their fiscal obligations are up front and should be able to plan with them.

"When tax rules change, they do so for the future only and there are strict limits to the re-opening of tax assessments."

While there is broad agreement that multinational corporations pay too little tax, tackling that problem should come from a transparent legislative process within the EU and through consensus building in international forums such as the OECD, Kroes claimed.

State aid enforcement was not the appropriate tool to drive forward tax reform, she said, adding: "It is a tool to address instances where a member state has made an exception to its own rules and given a specific company an advantage."

Echoing the view of Apple chief executive Tim Cook in an interview with Belfast Telegraph sister publication the Irish Independent, she said the approach being taken by Brussels would harm rather than boost levels of competition.

"You cannot change the rules of the game through ad hoc State aid enforcement and then seek retroactive recovery for unpaid taxes," Kroes added.

"Doing so would be fundamentally unfair and would harm competition, growth and tax income in Europe. And it raises serious questions about legal certainty and the rule of law.

"International corporate tax principles dictate that companies pay taxes where value is created.

In the modern world, companies create value through design, marketing and intellectual creativity. It is where those activities take place that the profits really originate."

For Apple that would mean that tax on global profits is due in the US, not Ireland.

Kroes was an EU Commissioner from 2004 to 2014, first in charge of competition and as head of the EU's Digital Agenda. She is now a director of Uber and Salesforce.

Belfast Telegraph

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