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€14 billion Apple tax fund could lose €70 million this year

The fund is to be held in escrow until the outcome of legal challenges to the European Commission’s landmark ruling in 2016.

Image: PA

THE APPLE TAX fund totalling €14 billion could lose €70 million a year, according to the Comptroller & Auditor General.

The fund is held under the terms of an agreement between the Irish State and Apple pending the outcome of legal challenges to the European Commission’s 2016 ruling. The landmark riling had found Ireland gave the multinational tech giant illegal state aid worth up to €13 billion.

The Irish State is appealing the decision as it denies there was any such sweetheart deal in place, and said the company was not treated any differently. Apple is also contesting the European Commission’s finding.

Despite the appeals, Ireland was still obliged to collect the funds from Apple and an agreement was made to hold them in escrow until the appeal process is concluded. 

In its annual report, the C&AG said a series of 12 payments were made to the fund from May 2018, totalling €14.285 billion. 

The escrow fund is invested in highly rated euro-denominated fixed income securities, cash and cash equivalents. At 31 December 2018, the financial assets held in the fund amounted to €14.271 billion.

The report states that the value of fund assets decreased by €14 million between September 2018, when the transfer of funds from Apple into the pot was completed, and the end of December 2018. This was as a result of “changes in the value of financial assets, combined with interest expenses”. 

A further €2 million in operating expenses was also accrued. 

“The performance of the escrow fund will be determined by the prevailing interest rate environment and the asset credit quality over the duration of the escrow fund which is
currently unknown,” the report states.

According to the report, the NTMA estimates that in the current negative interest rate environment, the fund could decline by 0.5% per annum.

On a €14 billion fund, this would amount to a loss of c. €70 million per annum.

Whatever the outcome of the legal dispute, neither Apple or the Irish State will be able to recoup the losses made while the money is in the escrow fund.

In April this year, in response to a parliamentary question, Minister for Finance Paschal Donohoe said the cost of appealing the case to that point had been €7.1 million, through legal fees, consultancy fees and other costs.

“This case has involved a significant degree of legal and technical complexity and additional expertise has been engaged where required,” he said. 

Judges in the EU’s lower General Court will give their decision no earlier than 2020. An appeal of that decision would then go to the highest court, the European Court of Justice, for a final decision that could come as late as 2021. 

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