• Abstract and Figures
• Public Full-text

\\jciprod01\productn\S\SWT\24-1\SWT106.txt unknown Seq: 1 21-MAR-18 12:08 A CUTE COWBOY STOLE OUR MONEY: APPLE, IRELAND, AND WHY THE COURT OF JUSTICE OF THE EUROPEAN UNION SHOULD REVERSE THE EUROPEAN COMMISSION’S DECISION Chantal C. Renta* INTRODUCTION ................................................. 178 R I. BACKGROUND .......................................... 179 R A. EU Law ............................................ 179 R B. Organisation for Economic Co-operation and Development (OECD) .............................. 183 R C. Ireland vs. US Tax Law............................. 186 R D. Apple in Ireland .................................... 187 R E. The Commission vs. Apple .......................... 190 R II. APPLE DID NOT RECEIVE STATE AID .................. 193 R A. Undertaking ......................................... 194 R B. Advantage .......................................... 195 R C. From the State or Through State Resources ......... 197 R D. Selective ............................................. 197 R E. Distorts or Attempts to Distort Competition ......... 200 R III. JEOPARDIZES US-EU RELATIONS ....................... 202 R A. Discriminatory Targeting of US-Headquartered Companies .......................................... 202 R B. Hinders U.S. Repatriation ........................... 204 R C. May Reduce Apple’s Investment in US Treasury Bonds ............................................... 206 R CONCLUSION ................................................... 207 R * LL.M. in Taxation, May 2018, Georgetown University Law Center; J.D., May 2017, Southwestern Law School. I want to thank my mother, Susan, and my father, Juan, for their guidance and support. I also want to thank my faculty advisors Silvia Faerman and Jonathan Miller, the Law Journal Staff, Tax Law Society, Daria and Quinn Morgendorffer, and every person fighting for comprehensive tax reform. 177 \\jciprod01\productn\S\SWT\24-1\SWT106.txt unknown Seq: 2 21-MAR-18 12:08 178 SOUTHWESTERN JOURNAL OF INTERNATIONAL LAW [Vol. 24 Abbreviations AEHT: Amazon Europe Holding Technologies AJCA: America Jobs Creation Act AOE: Apple Operations Europe AOI: Apple Operations International APA: Advance Pricing Arrangement ASI: Apple Sales International BEPS: Base Erosion Profit Shifting CEO: Chief Executive Officer CJEU: Court of Justice of the European Union CUP: Comparable Uncontrolled Price Method EU: European Union IRS: Internal Revenue Service (US) MEO: Market Economy Operator OECD: Organisation for Economic Co-operation and Development ORC: Office of the Revenue Commissioners TFEU: Treaty on the Functioning of the European Union TNMM: Transactional Net Margin Method TRE: United States Department of the Treasury US: United States of America VAT: Value Added Tax INTRODUCTION As more countries participate in the global economy, multina- tional corporations look to countries with tax advantages to establish foreign offices. The Republic of Ireland’s 12.5% corporate tax rate has drawn some of the largest multinational corporations in the world to its shores, including Apple.1 While Ireland does not offer the low- est corporate tax rate in the European Union (EU), its resident-based tax system provides corporations like Apple with the “holy grail” of corporate tax loopholes.2 Since Apple first entered Ireland in the 1990s, it has grown into one of the most valuable companies in the Fortune 500.3 While Apple’s success has earned it a devoted follow- ing, it has also placed the company under scrutiny for its tax practices. 1. David Haugh, Ireland’s Economy: Still Riding the Globalisation Wave, 305 OECD OB- SERVER 36, 36-37 (2016); see also Apple Tax Case: Why Is Ireland Refusing Billions?, BBC NEWS (Sept. 7, 2016), http://www.bbc.com/news/world-europe-37299430; Cork as a Business Location, CORK CHAMBER, http://www.corkchamber.ie/corks_economy.cfm (last visited Dec. 18, 2016). 2. Offshore Profit Shifting and the U.S. Tax Code - Part 2 (Apple Inc.) Before the Perma- nent Subcomm. on Investigations of the Comm. on Homeland Sec. and Governmental Affairs U.S. Senate, 113th CONG. 3 (2013) (statement of Sen. Carl Levin, Chairman, Permanent S. Comm. on Investigations) [hereinafter Permanent Subcommittee]. 3. Stephen Gandel, These Are the 10 Most Valuable Companies in the Fortune 500, FOR- TUNE (Feb. 4, 2016) http://fortune.com/2016/02/04/most-valuable-companies-fortune-500-apple/; \\jciprod01\productn\S\SWT\24-1\SWT106.txt unknown Seq: 3 21-MAR-18 12:08 2018] A CUTE COWBOY STOLE OUR MONEY 179 Recently, the EU attacked Apple’s tax structure in Ireland and found the company liable for more than =C13 billion in back taxes, even though the company never violated Irish tax laws.4 The Euro- pean Commission (hereinafter the Commission) attacked Apple’s tax structure in Ireland as violating state aid under the Treaty on the Functioning of the European Union (TFEU).5 Both Apple and Ire- land appealed the decision to the Court of Justice of the European Union (CJEU).6 On appeal, the CJEU should reject the Commis- sion’s decision against Apple and Ireland since it violates EU member states’ sovereign rights; Apple did not receive state aid within the meaning of TFEU, and the decision negatively impacts United States of America (US)-EU relations. Part one of this comment provides background into EU laws, its implications for EU member states, Apple’s structure in Ireland, and the European Commission’s decision against Apple. Part two con- tends that Apple did not receive state aid since it did not receive an “advantage” which was “selective” within the meaning of the TFEU. Part three asserts that the CJEU should reject the Commission’s deci- sion since it jeopardizes US-EU relations because: 1) the Commission tends to target US-headquartered corporations; 2) the US will be una- ble to collect tax revenue when Apple repatriates its Irish earnings; and 3) the US has a financial interest in Apple’s structure in Ireland. Part four consists of the conclusion and discusses the possible future of tax avoidance in the EU. I. BACKGROUND A. EU Law The institutional framework of the EU consists of the European Parliament, the European Council, the Commission, the CJEU, the European Central Bank, and the Court of Auditors.7 The Commis- see James Cook, A Deal Made in 1991Paved The Way For Apple’s Current Tax Issue, BUSINESS INSIDER (Aug. 30, 2016, 5:22 AM), http://www.businessinsider.com/how-apple-managed-to-get- its-tax-deal-in-ireland-in-1991-2016-8?r=UK&IR=T. 4. European Commission Press Release IP/16/2923, State Aid: Ireland Gave Illegal Tax Benefits to Apple Worth up to =C13 Billion (Aug. 30, 2016) [hereinafter Press Release on Ireland]. 5. European Commission on State Aid – Ireland, Alleged aid to Apple SA.38373, 2014 O.J. (C 369) 22, 22-23 [hereinafter Ireland Alleged Aid to Apple]. 6. Natalia Drozdiak, European Commission Decision Isn’t Endgame for Apple, Ireland, WALL STREET J. (Sept. 8, 2016, 2:00 AM), http://www.wsj.com/articles/european-commission- decision-isnt-endgame-for-apple-ireland-1473314400. 7. Consolidated Version of the Treaty on European Union art. 13, Oct. 26, 2012, 2012 O.J. (C 326) 22 [hereinafter Treaty on European Union]. \\jciprod01\productn\S\SWT\24-1\SWT106.txt unknown Seq: 4 21-MAR-18 12:08 180 SOUTHWESTERN JOURNAL OF INTERNATIONAL LAW [Vol. 24 sion has the sole power to create proposals for new legislation, and the sole law-making power for competition law policy.8 The Commission was originally comprised of two commissioners from each member state, however, as the EU grew, it became unfeasible for each member state to have two commissioners; consequently, they currently only have one each.9 It is the duty of the commissioners to ensure that EU law is upheld.10 In order to uphold EU law, the Commission has the power to represent the EU externally and prosecute member states for breaches of EU law.11 For the Commission to prosecute a member state, the EU must have competence to act. Competence can only be granted to the EU by the member states’ transfer of sovereign power.12 Any power not transferred remains with the member state.13 The EU does not have exclusive competence in controlling the internal market; rather, the member states and the EU share that competence.14 If the EU acts when there is shared competence, then it assumes exclusive power under pre-emption.15 However, the EU has not officially acted to set a uniform system for the internal market. Instead, member states must agree to establish national laws and policies that do not distort competition.16 Prior to the EU, many member states had multi-level taxes on goods and services resulting in tax being paid upon tax.17 The EU eventually agreed to adopt France’s taxation system for goods and services, which is known as the Value Added Tax (VAT) system.18 VAT was the result of negotiations among member states since they retain the sole power to create tax legislation.19 This is an area where the US and the EU greatly differ. 8. Id. art. 17; Consolidated Version of the Treaty on the Functioning of the European Union art. 288, Oct. 26, 2012, 2012 O.J. (C 326) 172 [hereinafter TFEU]. 9. Fact Sheets on the European Union, EUROPEAN PARLIAMENT, http://www.europarl.eu ropa.eu/atyourservice/en/displayFtu.html?ftuId=FTU_1.3.8.html (last visited Sept. 9, 2017); see TFEU, supra note 8, art. 244. 10. Institutional Affairs, EUROPEAN UNION, https://europa.eu/european-union/topics/institu tional-affairs_en (last visited Sept. 2, 2017). 11. See id. 12. TFEU, supra note 8, art. 1-4. 13. Treaty on European Union, supra note 7, art. 4-5. 14. TFEU, supra note 8, art. 4. 15. NIGEL FOSTER, FOSTER ON EU LAW 80-81 (5th ed. 2015). 16. DAVID W. WILLIAMS, EC TAX LAW 82-84 (1998). 17. Id. at 80-81. 18. Id.; see TFEU, supra note 8, art. 121. 19. See Cecille Remeur, Tax Policy in the EU, EUROPEAN PARLIAMENT, PE 549.001, 6 (Feb. 2015).

Load more

  32

Copy Link