Dublin Dun Leery

   The Irish government refuses to become tax collector for the world.
   That's the core of the fight between the European Union and the Republic of Ireland over how much and to whom Apple owes taxes.
   The dispute began when the U.S. computer firm relocated some of its operations to Ireland to take advantage of lower tax rates. Harmonizing tax rates has been a longtime goal of the EU, but Ireland has had a policy for more than 60 years of lowering its tax rates to lure foreign investment. 
   Now, the EU wants a slice of that pie. It has presented Apple with a tax bill of 13 billion euros, and wants Ireland to collect it and spread the proceeds to other EU nations.
   The Irish have refused, noting that their tax policy was in place before it joined the EU, and the Dublin government is likely to appeal the case in European courts.
   Tax is payable in Ireland on products and services originating in Ireland, and the corporate tax rate is 12.5 percent on profits. But since some of Apple's operations in Ireland do not involve products, services or exports, there is no tax liability there, according to the government's argument.
   The company does have a few places in Ireland where it makes products and provides services, but Apple does pay taxes on the profits of these operations. A different subsidiary funnels sales of some products to Europe, but because the products are not sold from Ireland, the Irish tax laws do not apply. The countries where the sales are made do collect a Value Added Tax (VAT), a form of sales tax, but they do not get collect a tax based on profits.
 These EU nations, then, do get tax revenue on stuff sold in their countries, but they insist that the arrangement with Ireland amounts to an illegal subsidy of Apple's business, and they want the Irish to collect and forward what they see as their cut.
   Dublin says no, they won't be tax collector for the EU.
   The EU complaint alleges that the setup in Ireland is effectively an illegal subsidy by the Dublin government amounting to 13 billion euros.
   In addition, the EU Commissioner for Competition has made three similar decisions in the past, against Luxembourg, Belgium and The Netherlands. That suggests a pattern -- that the EU leans on small countries but is reluctant to take on a larger member.

   The Irish also argue that the EU does not set tax laws for its member countries. Only each country has that right. Moreover, no laws of Ireland were broken, and all taxes due Ireland from Apple were paid. In addition, the EU has no authority to demand a slice of the Apple tax pie. This is because the EU is funded by a levy on each member state as a percentage of that nation's Gross Domestic Product (GDP). Perversely, recent moves reported separately by international companies to set up headquarters in Ireland have caused radical statistical boosts in the country's GDP, even as these increases are no more than accounting entries.

   Meanwhile, Apple is appealing to Washington, charging that the company is being targeted illegally. That may not get much traction, however, because if Apple does pay the 13 billion euro tax bill, that amount would be deducted from taxes payable in America.

Special thanks to our Dublin correspondent for reporting and editing.