Apple pays Ireland first €1.5bn tranche of disputed tax bill while still appealing EU ruling

Apple has started to pay off its 13 billion euros tax bill to Ireland over disputed taxes, transferring a first € 1.5 billion ($1.18 billion) payment to an escrow account set up by the Irish government. The announcement came on Friday, when Irish Finance Minister Paschal Donohoe confirmed to Reuters the payment was received. As a consequence of the money transfer by Apple, EU authorities are reportedly open to dropping a lawsuit against Ireland for failing to collect money from the American tech giant quickly enough. But despite such openness by Brussels, the road ahead remains tough for Apple after the EU’s highest court rejected a request by US government to help the tech giant in its appeal against the ruling. Background In August 2016, the European Commission ordered Ireland to collect €13 billion in back taxes from US giant technology company Apple Inc., following an investigation into the multinational company’s affairs. The Commission argued that Ireland extended preferential tax treatment to Apple for years – purportedly in the hopes that this would attract and consolidate its business in the country – which allegedly resulted in Apple paying only minimal taxes in the European Union. Both Apple and Dublin appealed the ruling, saying that no such “sweetheart deal” has ever been in place and that the iPhone maker’s tax treatment was in line with Irish and European Union law. But this didn’t stop the EU’s executive arm. Last October the Commission opened another chapter of the complex legal dispute, officially announcing it was taking Dublin to the European Court of Justice over delays in recovering the money. The first tranche of the payment was indeed originally due to be recovered in January 2017, four months after the initial ruling. Brussels claimed Dublin wasn’t doing enough in chasing the Cupertino, California-based company for the due amount, and started pressurising Ireland to recover the taxes as soon as possible to allow it to close the EU Court of Justice’s action for missing the deadline. In the event that Ireland was found guilty by the European Court of Justice, the country was liable to face fines. First tranche of payments Last Friday, Irish Finance Minister Paschal Donohoe pushed this risk for his country a bit further away, by informing Reuters the first payment has made its way into an escrow account set up by the Irish government. Mr. Donohoe never specified when the payment was received exactly. Bloomberg reports the European Commission is now considering dropping its legal action against Ireland, as a consequence of the first payment by Apple. “We continue to be in close contact with the Irish authorities and hope that recovery of the illegal aid is completed in full as soon as possible” ann official EU press release said Friday. “That would also allow us to close the ongoing procedure before the EU Court of Justice against Ireland for not having implemented the Commission decision of August 2016”, the document also said. Ireland’s appeal The money paid by Apple will reportedly be held in a low-risk escrow account managed by Amundi, BlackRock Investment Management and Goldman Sachs Asset Management, until a final decision on the complex “EU vs Apple” case will be taken. Indeed, both Apple and Ireland have denied any wrongdoing, and are formally appealing the decision. The appeal for the case is likely to be heard next fall, as suggested by Mr. Donohoe last April, but an exact date is still unknown. What is certain though, is that Apple has to face a tough battle ahead. Apple to fight alone Last Thursday, the European Court of Justice blocked US efforts to side with Apple in the appeal against the EU ruling, saying the government cannot intervene to help the tech company in the legal case. Last week’s announcement is an upholding of a ruling from a lower-court decision in December 2017, which said the American government had not proved it had a direct interest in the matter, Bloomberg reported, denying the stars-and-stripes government any possible involvement. According to Bloomberg, the US is now “disappointed” in the decision to deny its participation in litigation concerning the tax treatment of American companies, a US Department of Justice official said. “The US has a clear and direct interest in the treatment of Apple’s offshore profits, as confirmed in the tax legislation enacted within days of the lower court’s order denying intervention”, Bloomberg has quoted the DOJ official as saying. Money flow According to Irish press, the recent money transfer from Apple is the first of a series of payments that will flow into the escrow account during Q2 and Q3 of 2018, as declared by Mr. Donohoe. Bloomberg reported the Irish Finance Ministry said a full recovery of the money is expected by the end of September this year.