by Ana Filipa Afonseca, student of the Master´s degree in EU Law of UMinho
The importance of Apple’s case emerged when the journalist of the Irish Times asked the European Commission representative, Margrethe Vestager, in the press conference about the illegality of the aid provided by Ireland to Apple Sales International, if the Union wouldn’t be afraid of losing the investment of external companies with such sanctions. The answer given, without lyricism, made clear that the lesson wasn’t well-examined, after all, she simply answered “this is not a penalty, this is unpaid taxes”. The state aid prohibition read in the 107º TFEU conforms one of the most important competition laws, given that this mechanism contradicts the previous protectionist rules, inherent to the state individualism, in which the national independence was established through favouring State domestic economy to the detriment of other economies. Therefore, this response was surgical: urges the time for the Member States to finally consider the internal market as a single market, defined by the fair competition and this will be the main catch for future investment. Above all, the competition law demands an important shift of thought by the Member States – today we are not one.
The case Apple/Ireland raises several questions. Primarily, it takes into account the mould of the State aid, due to the fact that this is not a direct measure of tax exemption, fiscal guarantee, preferential tax interest , favourable deals in the land acquisition, special rates, as in most cases, the Irish measure translates in a broad sense, in a advantage (expression used in the Case Italy versus European Commission 2nd of July of 1974, Process 173/73) that benefits the economic operator. The illegal aid converts into splitting of profit between Apple Sales International and Apple Operations Europe which the result implies that the Irish branch office would be subjected to the normal taxation of Irish companies, however, the head office where most of the profit was allocated, was not subjected to any kind of taxation and this was possible under the Irish tax law, which until 2013 allowed for so called ‘Stateless Companies’.
Yet, this solution “distorts or threatens to distort competition” through a unjustified fostering of said company, and, as the Commission asserts, this Irish permission converts into an illegal aid contrary to the internal market. We would add that the state aid has been rewritten during a time of crisis, this Irish rule that provided virtually total fiscal exemption to a group of companies, supposedly, justified by the necessity of recovering investment, it’s exemplary of the fact.
Furthermore, underlined by the decision of the Commission, the prohibition of the state aid in the Treaty applies in the Member States relationship with any company, European, American, or otherwise.
This statement brings a tough nut to crack. As this unsettlement seems to be a purely internal matter, given the fact that each Member State relates with other companies, not European, this being a matter of economic strategy, and may even question the sovereignty of Ireland’s taxation. This, apparently, being the main argument for the appeal.
Still, this argument is under-shadowed by the importance of the competition law, starting point of this brief commentary. The competition law was proof of a full economic integration. These rules are antagonist to the idea of “purely internal matters” that allow its distortion. Thus, despite the taxation in these cases might be determined by the Member State in cause, in the limit, these options can’t be converted into the uselessness of a whole culture of fair competition, as a symbol of a bigger integration: a political integration.
The debate was ignited, the Court of Justice will decide upon.
Picture credits: Tax by Maialisa.