Apple tax ruling is unfair, says former European commissioner

The European commission’s decision that Apple owes Ireland €13bn (£11bn) in unpaid taxes has been branded “fundamentally unfair” by its former competition commissioner, Neelie Kroes.

Writing for the Guardian, Kroes attacked Tuesday’s ruling by Margrethe Vestager, her successor as Europe’s top competition watchdog.

The commission found that Ireland had breached state-aid rules by allowing the California technology group to pay substantially less tax than other businesses since 1991. It made a similar ruling against Starbucks and Fiat in the Netherlands last year, and has used state-aid laws to launch ongoing investigations into Amazon and McDonald’s in Luxembourg.

Kroes said state-aid rules should not apply to tax matters. “EU member states have a sovereign right to determine their own tax laws,” she said. “State aid cannot be used to rewrite those rules. However, the current state-aid investigations into tax rulings appear to do exactly that.”

Apple routes the majority of its European and other foreign revenues through Ireland. The commission found Apple’s effective rate of corporation tax at one subsidiary in Ireland was just 0.005% of its profits in 2014 – equal to a tax bill of just €50 on each €1m of profit.

Kroes is also critical of the retrospective nature of the ruling, which determined that Apple had underpaid its Irish taxes from 2003 until 2014, saying a fundamental principle of tax law is that changes do not apply to past years.

She writes: “You cannot change the rules of the game through ad hoc state-aid enforcement, and then seek retroactive recovery for unpaid taxes. Doing so would be fundamentally unfair and would harm competition, growth and tax income in Europe. And it raises serious questions about legal certainty and the rule of law.”

The Dutch former politician, who headed the commission’s competition directorate from 2004 to 2010, now sits on the public policy board of the taxi-hailing business Uber, a technology group headquartered in California. Uber uses subsidiaries in the Netherlands to shield its overseas income from United States taxes.

“We all agree on the need to tackle tax avoidance, but such reform should come from a transparent legislative process within the EU and through consensus building in international fora,” says Kroes.

She argues that the commission’s use of state-aid laws to force companies to pay more tax risks undermining the work of the Organisation for Economic Co-operation and Development (OECD), which has been pushing for more transparency around the tax paid by multinationals and ways to block the use of artificial structures designed to cut tax bills.