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Tags Current Affairs

Ireland’s fight to maintain its tax structure

Date: 18 July 2020 Tags: Miscellaneous

Issue

European Union’s second-highest court ruled in favour of the tech giant Apple, holding that the American company did not owe the Irish government €13bn (around Rs 1.1 lakh crore) in back taxes.

 

Background

The General Court was hearing a joint appeal by Apple and the Irish government against a 2016 decision of the European Commission, which found that Ireland had given Apple an unfair tax advantage from 2003 to 2014, and had ordered the island nation to recover €13 billion from the technology company.

 

Details

  • While the verdict has been welcomed by Apple and the Irish government, critics have denounced it as a setback to the EU’s tax collection efforts– which have become increasingly important in the wake of Covid-19’s economic fallout.

  • In August 2016, the European Commission said that the Irish government had been illegally favouring Apple, giving it advantages that it had not offered to other companies.

  • It alleged that Apple’s “so-called head office” in the country “only existed on paper”, and accused Ireland of allowing the company to pay “substantially less tax than other businesses over many years”.

  • Concluding that Ireland had provided illegal aid to Apple, the Commission had ordered the company to repay the Irish government €13 billion in back taxes.

  • Ireland’s low corporate tax rate is a key feature of its economic policy. At 12.5 percent, it is the second-lowest in the EU. It also has a relatively lenient data protection regime.

  • These factors have been instrumental in attracting large tech companies to the island, where American companies like Apple directly or indirectly account for about 20 percent of all jobs.

  • To protect its image as an investment destination for large companies, the Irish government took the view that Apple should not be obligated to pay back taxes.

  • The ruling could bring together EU states to crack down on Ireland and other low-tax regimes, as well as bolster resolve within the Union for imposing a digital tax on large tech firms.

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