Apple used two subsidiaries in Ireland in a way that “did not correspond to economic reality”, the European Commission has said.

The full ruling of the Apple Tax case was released today with the Commission saying the Government here has not put forward any justification for the tax regime under which the iPhone giant operated.

The Government is set to vigorously contest a decision made earlier this year, which stated that Apple owes Ireland €13bn.

Apple was told to pay Ireland €13bn in back taxes in August after the European Commission ruled that it had received State aid from the Irish government between 2003 and 2014.

The Commission has said that two tax judgements issued by Revenue artificially lowered their tax bill and amounted to State aid.

In their full ruling issued today, the Commission said that Apple received “selective treatment”.

Expand Close Margrethe Vestager, the competition commissioner of the European Commission Photo: Jasper Juinen/Bloomberg / Facebook

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It comes after officials in the Department of Finance in Dublin argued that the Europe is trying to rewrite Irish law.

The commission said that the Government "has not put forward any justification at all for the selective treatment" of Apple.

The Commission states it was “unable to identify any consistent set of rules that generally apply on the basis of objective criteria to all non-resident companies operating through a branch in Ireland”.

In a statement released this morning, Apple accused the commission of having a "pre-determined outcome" in mind before the investigation into its tax practices.

"The Commission took unilateral action and retroactively changed the rules, disregarding decades of Irish tax law, US tax law, as well as global consensus on tax policy, that everyone has relied on.

"If their opinion is allowed to stand, Apple would pay 40pc of all the corporate income tax collected in Ireland, which is unprecedented and, far from leveling the playing field, selectively targets Apple. This has no basis in fact or law and we're confident the ruling will be overturned," Apple said in a statement.

Oxfam Ireland has said the ruling gives a rare glimpse into the secretive world of corporate tax deals and further damages Ireland’s reputation.

“This ruling backs up Oxfam’s recent assessment that Ireland facilitates corporate tax avoidance on a grand scale," Oxfam Ireland’s Chief Executive Jim Clarken said.

“The billions shaved off Apple’s tax bill are not an abstract sum. Tax dodging has a real human cost. When a company gets away without paying the tax it should, that has a direct impact on the lives of people around the world. This is tax that should be paying for schools, roads, medicine and lifting people out of poverty.”

“In our work overseas we see the impact that weak or non-existent public services has on poor people. The lost tax revenues could make an enormous difference at home and in developing countries,” he said.

Oxfam is calling on the Irish Government to take immediate action to make companies publish where they make profits and pay tax and to be a real leader in international tax reform.

“Measures taken to date by the Government don’t go far enough,” said Mr Clarken.

“Ireland facilitates the shifting of $93bn in excess profits a year, has had the biggest ever tax ruling against it in the Apple case and has no effective backstop measures against many corporate tax avoidance structures. The double Irish is still on the books. Likewise, Ireland has not agreed to public country by country rules, public listing of beneficial ownership and making tax rulings public.

“Ireland also needs to take a real leadership role in international tax reform instead of being a blocker - supporting measures to stop unfair and unproductive tax incentives and supporting the establishment of UN intergovernmental body on tax,” he added.

Speaking at the release of the decision in August, European competition commissioner Margarethe Vestager said that the size of Apple's giant tax bill may be reduced through payments from its Irish subsidiaries back to its US parent.

The Cupertino tech giant established two companies here, namely Apple Sales International and Apple Operations Europe, both set up to record profits in Ireland.

Ms Vestager said the full amount may not be payable to Ireland.

"The amount to be paid back to Ireland would also be reduced if the two companies were required to pay larger amounts of money to their US parent company to fund the research and development efforts, in addition to the annual payments they have made," she said.

Apple Sales International, which accounts for most of the unpaid taxes, holds the intellectual property rights to sell and manufacture Apple's products outside of America.

The company buys products like iPhones, Macs, and iPads, from its California-headquartered parent and then sells them throughout Europe, the Middle East, Africa, and India. All sales throughout the regions, Ms Vestager said, are recorded in Ireland.

"Other countries, in the EU or elsewhere, can look at our investigation. If they conclude that Apple should have recorded its sales in those countries instead of Ireland, they could require Apple to pay more tax locally. That would reduce the amount to be paid back to Ireland," she said.

The commission's decision said Apple Sales International paid less than €50m in tax on profits of €16bn in 2011, an effective rate of 0.05pc.

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The Irish Government has said the ruling has impinged on the country's tax sovereignty and exceeded its powers.

Apple has had a base in Ireland since 1980 and employs 6,000 people.

The Finance Department slammed the Commission's ruling in a statement ahead of the publication of the decision.

"The commission has exceeded its powers and interfered with national tax sovereignty," the Government told the commission in legal arguments made public today.

"Ireland did not give favourable tax treatment to Apple," it said. "The full amount of tax was paid in this case and no State aid was provided. Ireland does not do deals with taxpayers."

Apple, which has the support of the Irish Government in the decision, said it will appeal the case this week.

The American Chamber of Commerce offered its support to Ireland in the ruling.

"The chamber is fully supportive of the Irish Government’s decision to appeal this ruling and the independence of Ireland's Revenue authority to operate to the highest international standards.

"The chamber believes that Ireland, and every other EU member state, should not have its tax policy and administration second guessed retrospectively," it said in a statement this morning."

The company, which is headed up by chief executive Tim Cook, said EU regulators ignored tax experts and corporate law and deliberately picked a method to maximize the penalty.

Apple intends to lodge an appeal against the Commission's ruling at Europe's second highest court this week, its General Counsel Bruce Sewell and Chief Financial Officer Luca Maestri told Reuters in an interview at the company's global headquarters in Cupertino.

The iPhone and iPad maker was singled out because of its success, Sewell said.

"Apple is not an outlier in any sense that matters to the law. Apple is a convenient target because it generates lots of headlines. It allows the commissioner to become Dane of the year for 2016," he said, referring to the title accorded by Danish newspaper Berlingske last month.

Apple will tell judges the Commission was not diligent in its investigation because it disregarded tax experts brought in by Irish authorities.

"Now the Irish have put in an expert opinion from an incredibly well-respected Irish tax lawyer. The Commission not only didn't attack that - didn't argue with it, as far as we know - they probably didn't even read it. Because there is no reference (in the EU decision) whatsoever," Sewell said.

(Additional reporting from Reuters)

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