Irish cabinet delays decision on Apple tax appeal

August 31, 2016 5:50 AM EDT

A man looks at his phone as he walks past an authorised apple reseller store in Galway, Ireland August 30, 2016. REUTERS/Clodagh Kilcoyne

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By Padraic Halpin and Conor Humphries

DUBLIN (Reuters) - Ireland's cabinet could not agree on Wednesday whether to fight a European Commission ruling against Dublin's tax dealings with Apple (NASDAQ: AAPL), raising questions over any appeal and the government's stability.

Finance Minister Michael Noonan has insisted Dublin would appeal any adverse ruling ever since the EU investigation began in 2014. But after over five hours of discussion, the cabinet adjourned until Friday when the government said a decision would be made.

Dublin has just over two months at the latest to make an appeal against the Commission's ruling that the U.S. tech giant should hand over to Ireland unpaid taxes of up to 13 billion euros ($14.5 billion) ruled to be illegal state aid.

Some Irish voters are astounded that the government might turn down a tax windfall that would be enough to fund the country's health service for a year, and this appears to be complicating the cabinet decision whether to fight the ruling.

"Following the discussion, it was agreed to allow further time to reflect on the issues and to clarify a number of legal and technical issues with the Attorney General's Office and with officials," the government press office said in a statement.

Apple, one of many major multinationals whose European headquarters are based in Ireland, has said it will appeal the decision and a failure by the Irish government to join them could undermine the country's pro-business credentials.

Noonan said on Tuesday he "disagreed profoundly" with what he called a bizarre order from the Commission.

However, the Independent Alliance - a group of independent lawmakers represented in the minority coalition government - said on Tuesday that they were reviewing the EU's decision and would need to consult further with Noonan, tax officials and independent experts.

If the Independent Alliance refused to back an appeal and pulled out of the government, Prime Minister Enda Kenny's Fine Gael party would no longer have sufficient support in parliament to pass legislation. That would prompt the collapse of the government, analysts said.

"The government can't survive without the Independent Alliance," said Eoin O'Malley, politics lecturer at Dublin City University.

"(But) the way the Independent Alliance appear to work is that they have cabinet (discussions) first and then discuss it with each other. I would be more concerned if in a week's time the cabinet hadn't agreed."


As well as the Independent Alliance, Fine Gael also relies on an agreement with its biggest rival, Fianna Fail, to abstain on key votes to facilitate the minority government. Fianna Fail said on Tuesday it would back an appeal through the European Courts.

Both parties were criticized by left-wing Sinn Fein, the country's third largest party. It said the government should accept the Commission's ruling and impose the tax bill on the iPhone maker.

It also increased pressure on the Independent Alliance, which agreed to go into coalition in May only after an unprecedented 10 weeks of post-election talks and has already broken ranks on another vote.

"It is important that Irish taxpayers are represented. The Independent Alliance have an opportunity to do that. They should oppose any appeal and insist that the correct tax bill is paid by Apple," Sinn Fein's David Cullinane said in a statement.

Opinion on the government's stance was split on the streets of Dublin where some were stunned that they would give up a potential 13 billion euro tax windfall.

"They are doing the wrong thing. They don't care about the normal people," said Louise O'Reilly, 57, a full-time carer for her diabetic and partially blind mother. "There's two laws in this country, one for the rich and one for the poor."

At stake for Ireland is the lure of its low corporate tax rate, a cornerstone of economic policy for decades that has drawn investors from large multinational companies whose staff account for almost one in 10 of the country's workers.

The Apple decision also comes as Ireland seeks to market itself as one of the top locations for any companies considering moving operations from Britain after its vote to leave the EU.

Dublin has already seen a jump in inquiries, particularly from financial services firms.

The Commission's drive could check that advantage. The U.S. Treasury warned that the move threatened to undermine U.S. investment in Europe and a spokesman for British Prime Minister Theresa May said it would welcome any company that is prepared to invest in the United Kingdom.

Others on the streets of Dublin shared the government's concerns. "People need to educate themselves. If we take the 13 billion we'll have a catastrophe jobs wise," said Tracey Whelan, 46, an accountant for a private equity firm in Dublin.

"Obviously we'd love it... but it's a poisoned apple."

(Additional reporting by Conor Humphires, and Kylie McLellan in London; Editing by Andrew Roche and David Stamp)

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