(Bloomberg) As Ireland braces itself for a European Union order to claw back unpaid taxes from technology giant Apple Inc., government officials have warned Finance Minister Michael Noonan that he would face two crucial questions once the decision comes.
The first is whether to appeal at the EU’s top court. The second is what to do with the “large recovery amounts” pending the outcome. Ireland could be sitting on the cash for “several years,” according to a briefing note from last month published Wednesday.
Amid growing speculation that Apple could be forced to pay back billions of euros of tax breaks, officials said they are preparing for the worst and that an adverse ruling “could have significant negative implications for Ireland, in terms of reputation and the creation of uncertainty around our tax system.”
The iPhone maker’s tax agreements have been criticized as unfair by EU regulators who said the deals were improperly designed to give Apple a financial boost in exchange for jobs in the country. The methods used to determine profit allocation to two Irish units “result from a negotiation rather than a pricing methodology,” the EU regulator said in 2014.
Nothing Wrong
Ireland has consistently said it’s done nothing wrong and that it would appeal any negative decision from the European Commission. Officials said in the note they had no firm date for when the EU authority would deliver a decision, but warned it could be “soon.”
Apple declined to immediately comment. The commission didn’t immediately respond to comment on possible timing of the EU’s decision. The Irish Finance Ministry had no comment.
The EU has gathered information on hundreds of companies and their agreements with national authorities as part of a clampdown on sweetheart tax deals that may be illegal state aid.
Margrethe Vestager, the EU’s antitrust commissioner, dropped hints about her approach to the case last week as she rebuffed claims regulators are thwarting foreign investment.
“It may be said that we are holding back investment and growth just because we apply the rules in a similar matter to foreign companies as well as local ones," she said in Brussels Friday. "It is our job to take decisions in line with the evidence, the economics and the law. Nothing else.”
If companies have received illegal state aid from an EU country, “they need to pay it back, no matter what company, where the company comes from," she said.
The EU already showed its resolve last year when it ordered Starbucks Corp. to pay as much as 30 million euros ($34 million) in back taxes. The commission said a Dutch unit paid millions of euros to a U.K.-based arm of the company that isn’t taxed in Britain in exchange for a technique to roast coffee beans.
Exaggerated tax-deductible royalty payments for this technique allowed Seattle-based Starbucks to unfairly lower its Dutch taxes, it said.
