The Misuse Of EU Rules In The Name Of Tax Justice: Comparing Apples To Burgers

The Apple case has shot EU state aid rules into the headlines. It finishes the metamorphosis of State Aid from what was seen as a somewhat dull back-room legal field into a high-visibility front-line political topic. The case was announced in a high drama televised press conference which made headlines all around the world.

The Apple case was high profile because of the company concerned, the financial impact on budgets on both sides of the Atlantic and also because it brought simmering political unease with the subject of State Aid in tax matters to a head.

In this blog we will seek to frame some of the political questions in a more objective legal manner in order to bring structure to the political debates raging around the subject. We will look in particular at the Apple and McDonalds cases but similar considerations apply to others.

Shouldn't the EU States concerned take the money and be happy?

Politically, it is tempting to say yes in the short term, as all the EU States concerned could certainly use the windfall. In the medium to long term, it would be an error in our view. The States concerned, rightly in our view, believe that they were applying their tax rules in line with their administrative practice. All of this in line with the exercise of the State's national sovereignty and EU commitments. The EU commission disagrees. The next step in this disagreement is to take the matter to the European Court of Justice (ECJ) the Supreme Court in these matters that is binding on the EU commission and the EU States. This step is common in State Aid matters. For a State not to do this in a matter that is as important as these cases, would in our view be a unilateral surrender of sovereignty. On a technical level, we could even see a risk that the sums levied, absent an appeal, might not be regarded as a legitimate tax by other countries in foreign tax credit matters, leading to additional costs to the multinationals concerned.

Is this simply a grab for tax revenues by the EU commission at the expense of the US tax payer?

It is tempting to view it as such, as for each Euro recovered, there is a corresponding effect on the US budget. This was outlined in the recent letter from the US treasury to the EU. The impulsion for launching the cases looks very politicised and there is an understandable temptation to threaten some form of retaliation. There is a legal analysis in the final resort however and, if the final finding of the ECJ is that...