Ireland to decide how to spend €13 billion

A landmark ruling by the EU’s top court means Ireland will receive 13 billion euros ($14.4 billion) in unpaid taxes from Apple – a windfall that Dublin has been trying to avoid for years.

That leaves the small EU member in an awkward but enviable position politically. Irish lawmakers are expected to work out how best to use the upcoming cash infusion ahead of a general election, which must be held by March next year.

The European Court of Justice (ECJ) said the EU’s top court made its final ruling on Tuesday, ruling that Apple must pay billions of euros in back taxes to Ireland.

The decision was welcomed by tax justice advocates and outgoing EU competition chief Margrethe Vestager, who called the announcement a “huge victory” for European citizens.

Apple said in a statement it was disappointed with the ruling, while the Irish government described the case as “a matter of historical significance now only.”

The Irish government said in a statement that its position has been “not to grant preferential tax treatment to any company or taxpayer”. A spokesperson added that the process of transferring assets held in managed funds to Ireland will now begin.

“Especially now that the Irish government is in a position where they have been telling the Irish people and the international community that they don’t want the $13 billion. [euros] – It’s not ours,” Aidan Regan, associate professor of political economy at University College Dublin in Ireland, told CNBC by phone.

“They are facing a lot of domestic political pressure, there may be an election in a few months, and now they may have a $13 billion windfall. [euros] This is against a backdrop of huge infrastructure problems and a housing crisis,” he continued.

“So I suspect the Irish government will pay little attention to what is happening internationally and the reputational cost of this ruling, and wonder what they will say to the Irish electorate ahead of the election in a few weeks.”

A spokesman for Ireland’s Treasury referred to the government’s written statement when contacted for comment by CNBC.

Ireland is Apple’s base in the European Union and has one of the lowest corporate tax rates among 27 countries.

Ireland has argued for years that iPhone makers should not repay unpaid taxes to the country. It contested the case over concerns it could threaten the country’s ability to attract investment from companies keen to limit overseas income tax bills.

However, the European Court of Justice’s ruling on Tuesday confirmed the European Commission’s 2016 decision that the country provided “unlawful aid to the US tech giant that Ireland must withdraw”.

The decision comes as Ireland is in the unusual position of running a multi-billion-euro budget surplus, partly due to strong corporate tax collections.

“This decision is lucrative for Ireland, delivering a financial windfall for the country, but undermines the Government’s long-standing position that Ireland does not provide preferential tax treatment to any taxpayer, company or otherwise. ,” said tax partner Robert Dever. Multinational law firm Pinsent Masons told CNBC via email.

“It is hoped that any damage to Ireland’s international reputation will be limited given the changes in Irish tax law, including corporate tax residency and the attribution of profits to branches of non-resident companies, over the past few years,” Dever said.

“The process of transferring assets to Ireland in the escrow fund, which was set up to hold funds allegedly owed by Apple for tax liabilities and interest pending a final ruling for several months, will begin following today’s judgment.” It will be finalized later,” he added.

Alex Cobham, chief executive of the Tax Justice Network, which tracks corporate tax avoidance, said on Tuesday he welcomed the European Court of Justice’s ruling on Apple’s tax affairs in Ireland.

“But this ruling only highlights the profound failure of international tax rules to protect the rights of countries to tax economic activity within their own jurisdictions,” Cobham told CNBC via email.

“This demonstrates the urgency of the global reform process currently underway through negotiations on the United Nations Framework Convention on International Cooperation in Tax Matters,” he added.

Separately, Chiara Putaturo, an EU tax expert at global poverty charity Oxfam, said on Tuesday that the ECJ’s ruling “exposes the EU’s preference for tax havens for multinational companies.”

“This ruling cannot stand alone as a victory, it needs to force the EU to close all loopholes that allow companies to avoid paying their fair share of taxes,” Putaturo said in a statement.

“Now is the time for them to end the drain on government coffers and use those revenues to fight the climate crisis and build hospitals, schools and other services for people.”