Where as there was utter silence from the Dublin law and accounting community on the Section 110 Vulture Fund scandal (we all know why, as profiled on this thread thepropertypin.com/viewtopic.php?p=886770#p886770), we are getting much better input on the Apple case (especially the smaller ISFC law tax law firms who were not involved in the insane (and naive) tax structuring that Apple tried to pull off in Ireland.
This article is essential reading for Apple tax “anoraks”, as it highlights an issue at the core of the Apple Case:
COMMON LAW: It is by no accident that many of the world’s great tax-havens, are rooted in Common Law (as handed to them by the UK, one of the biggest tax-havens). Common Law is a key part of the tax avoidance tool kit. Common Law (as it pertains to tax) is all about getting the ruling, pouring over the wording and finding the cracks. It is also great for situations where the Taxing Revenue (i.e. Irish Revenue in Apple’s case), wants to HELP your avoidance (like Apple), as their input can be more focused / directed to letters which only give clarification on specific words (i.e. the Taxing Revenue’s support for your tax avoidance is not so blatant). Tax avoidance in Common Law is all about “loopholes”.
CIVIL LAW: The EU’s Civil Law approach is more like that you would expect the rules to be. There is a long pre-amble to each set of leglislation explaining what the goal of the leglislation is. Therefore, if a clever lawyer finds a hole in the wording, the judge can just rely on the pre-amble to still catch you. The critism of Civil Law is that it can be more “political” as judges have far more power to assert them selves in situations (I laugh when I hear commentators protesting against the notion that the ECJ is political, which it is). This is why Margrethe Vestager’s work almost feels like its is from “first principles”. i.e. if Apple created a structure to avoid all EU taxes and Irish taxes, then it must be wrong, as neither EU or Ireland has 0% tax rates.
In Irish Common Law, Apple is a “loophole” to be closed. In EU Civil Law, Apple is tax evasion.
IRISH TIMES: Could Brexit stymie the Apple tax appeal?
There may well be no judge with the requisite experience to hear the case
The irony is that Irish Revenue’s anti-avoidance rules are a kind of quasi-Civil Law approach (i.e. if the Common Law tax rules produce perverse tax outcomes, then Revenue’s anti-avoidance over-rules them). It is not accident that Ireland’s Common Law Courts System, being so culturally hostile to Civil Law, makes it almost impossible for Revenue to use anti-avoidance prosecution (and have almost never done so).
As an example, we have Michael Noonan’s amendment to Section 110 this morning to shut down the “loophole”. It is not a bad effort (although only focuses on property; all unsecured loans are left out), but the Dublin IFSC law firms will pour over this amendment to find the cracks.
GOVERNMENT: Section 110 of the Principal Act is amended by inserting the following after subsection (5):
(And the second last paragraph of the amendment is where the “crack” probably is, when OakTree start charging Mars Capital Ireland 15% per annum for its capital (an arm’s length mezzanine financing rate), which will undo most of the amendment).
However, an EU Civil Law to this amendment, would start with a pre-amble which would say that “Section 110 is not to be used by any entity to avoid Irish taxes on profits that were generated from the Irish domestic economy” etc.