Apple makes first payment of $15.3b disputed irish tax bill to escrow account – general discussion discussions on appleinsider forums electricity terms and definitions

Finance Minister Paschal Donohoe informed Reuters on Friday the first payment has made its way into the escrow account. While the amount of 1.5 billion euros ($1.76 billion) was confirmed by the minister, it is unclear exactly when Apple made the payment to the account, nor when the remainder of the due taxes will be similarly paid.

Bloomberg reports the European Commission is considering dropping its legal action against the Irish government for failing to collect the back taxes, due to the first payment. In March, the Commission advised it would be willing to withdraw from the case, originally launched due to the slow progress in recovering the taxes, but only if the full amount was paid.

"We continue to be in close contact with the Irish authorities and hope that recovery of the illegal aid is completed in full as soon as possible," the European Union advised. "That would also allow us to close the ongoing procedure before the EU Court of Justice against Ireland for not having implemented the Commission decision of August 2016."

The decision in question was an order to Ireland to collect 13 billion euros in back taxes, following an investigation into Apple’s tax affairs. The Commission argued Apple had received preferential tax treatment from Ireland, constituting illegal state aid.

Apple funned large sums of revenue through Ireland, using assorted loopholes in order to pay the minimal amount of tax due. The Commission’s investigation found Apple paid 1 percent on profits in 2003, and as little as 0.005 percent in 2014. The Irish government was accused of reverse-engineering tax deals it made with Apple on the fly, to ensure favorable rates.

Both Apple and Ireland have denied any wrongdoing, and are appealing the decision. On Thursday, the European Union Court of Justice blocked efforts by the U.S. government to help Apple, despite the U.S. claiming it has a vested interest in the affair, as Apple could potentially claim tax credits over the Irish funds.

The appeal for the case is likely to be heard in the fall, Donohoe suggested in April, but an exact date is unknown. As part of the ongoing legal action, the unpaid taxes are to be held in escrow by the Bank of New York Mellon, with the full amount expected to be paid by the end of the third quarter of 2018.

To clarify for people who are perhaps just arriving to this story, Apple is appealing this tax bill — but is paying into the escrow account in the meantime. Should they win their appeal, they will get some or all of that money back (a full victory is extremely unlikely).

I’m not sure why Apple is the one having to pay, since it was the government of Ireland that offered the company the "illegal" tax discount. As far as i’ve been able to discover, there’s no evidence Apple coerced a special tax deal out of the Irish government, so not sure why they’re on the hook for the whole amount. That said, I’m in favour of multinationals paying their fair share of taxes generally, so I’m hoping that Amazon will be next in the cross-hairs …

Like Ireland, Luxembourg doesn’t like being told by the EU commission to recover taxes from Amazon under the same rules applied to Apple, that the deal the government made with them amounted to illegal state assistance. So they’re appealing too just as aIreland is.

To help you understand why the money will come from the taxpayer (Apple or Amazon or whoever) should be easy. The EU is not levying a fine on anyone. What they’ve determined is that making a special tax arrangement was not permissible in the first place. Just like other taxpayers Apple (and Amazon) must pay the statutory corporate tax-rate. No fine. It’s taxes due the Irish or Luxembourg government as representatives of their people. edited May 19•

Because, when it comes to Ireland collecting these funds from Apple, Apple has more leverage. What Ireland is being required by the European Commission to do is, in effect, contrary to Irish law and policy. Ireland, at the Commission’s direction, is trying to collect money from Apple which Apple, by Ireland’s laws, doesn’t owe Ireland – money which the appropriate Irish authority had told Apple that it wouldn’t owe.

If Ireland and Apple win their appeal(s), the money will need to be returned to Apple. In the meantime, Ireland doesn’t want to be in a situation where there might be losses on the funds held in escrow (or, if not losses, insufficient gains) such that Ireland would have to make up the difference if and when the money was returned to Apple. So it needed Apple to agree on how the funds would be managed in escrow and agree to accept whatever funds were there if and when they won their appeal(s). So Apple had significant leverage when it came to negotiating the terms of payments and how the funds would be managed.