Written by Cécile Remeur,
In late August 2016, the adoption by the European Commission of a state aid decision on Ireland’s tax rulings in favour of tax-resident companies related to Apple raised substantial debate, with regard to the multinational enterprise (MNE) concerned and the amount to be recovered.
Taxation and state aid relating to MNEs
Taxation of MNE in a global environment
© momius / Fotolia
With regard to MNEs’ taxes, corporate aggressive tax planning and tax avoidance have been in the spotlight. ‘Tax avoidance’ generally remains within the limits of the law, unless deemed illegal by the competent authorities or, ultimately, by the courts, in particular as an abuse of law; tax avoidance can be described as a risk-taking decision. In contrast, tax evasion and fraud are both illegal.
In short, corporate aggressive tax avoidance uses loopholes, asymmetries and mismatches of tax rules that allow MNEs to stay…
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Irish Politics Forum 
Many thanks for reblogging this insightful and succinct post. The observation towards the end: “Taxation of non-repatriated profits which can be used as a method of corporate tax avoidance by MNEs is a matter for the country providing the option not to repatriate those profits.” is very pertinent. It is the US, in effect, which was providing “state aid” to Apple by providing it with the option not to repatriate profits. Ireland crystalised this award of state aid by allowing Apple to run a lot of its revenues and profits through Irish incorporated companies that weren’t tax resident anywhere. The irony is that Ireland was probably levying very fair and accurate taxation on Apple on the basis of the economic activities actually carried out here.
It is significant that once DG COMP began its investigation of its tax arrangements in Ireland the Government decided to close down the option of establishing an Irish registered company that wasn’t tax-resident anywhere and Apple decided to restructure its operations so that it is now paying Irish corporate tax on much of the profits run through the previously non tax-resident anywhere company. This is the main source of the 26.5% increase in GDP and the massive increase in corporation profits tax received in 2015.
DG COMP is effectively saying to the US: “sort out your corporate tax system because it’s queering the pitch for everyone”. As noted above, Ireland didn’t actually provide state aid; it simply crystalised the implicit state aid being provided by the US by facilitating aggressive tax avoidance. Most of the tax should have been extracted by the US, but it has forgone this tax revenue. And DG COMP recognises this: “..other Member States could subsequently reassess the tax paid by Apple in their jurisdictions, in the light of the investigation”. This sort of aggressive tax avoidance comprises a large share of the endemic rent-seeking that is so damaging to national economies and the global economy.
The behaviour of the Irish authorities (and of the army of well-heeled and influential functionaries) who facilitated this egregious rent-seeking displays a mental ingenuity and agility, an ability to suspend disbelief almost indefinitely, a skill at projecting and sustaining optical illusions, a moral flexibility (if not a studied moral vacuity) and exceptional skills at concealing and distorting the underlying realities that few, if any, jurisdictions have been capable of sustaining. It is indeed a tribute to the evasiveness and deviousness of the Irish authorities and associated functionaries that the EU authorities (in the form of DG COMP) believe they are compelled to use the sledge-hammer they have deployed.