The finding by the EU Commission that Apple should return €13 billion (plus interest) in unpaid taxes because they constitute illegal state aid has raised a number of interesting and important issues that go beyond the specific case (see here and here for earlier commentary). One of these is that the Irish government is in a pickle. But worry not: there is a simple solution.

Apple is being obliged to pay back taxes. It is logical that it is unhappy about this and will appeal. On the other hand, it is important to realise that the Commission has not said that the Irish government is entitled to claim unpaid taxes from a major corporation, but that it is obliged to do so. On the face of it, even leaving aside interest, the €13 bn would be a very nice fiscal windfall (roughly equal to annual health spending) for a country whose public finances were battered by the financial crisis. Yet Ireland will also appeal the ruling. Not doing so would, clearly, imply an admission of guilt: the tax deals reached by previous governments with Apple – and by implication with other global corporations – would be brandmarked and the country would suffer a serious reputational loss.

What this tells us is that the EU’s state aid procedures underpinning the ruling that Ireland must recover unpaid taxes, are problematic. [Read more…]